Fitch: Israel's fiscal progress dented, not reversed

Fitch Ratings said that although progress in reducing Israel's public debt would slow due to the cost of the war in Lebanon, it would nevertheless continue, provided the fiscal framework endorsed by the cabinet this week was respected.

Fitch said it expects Israel's public debt burden to rise slightly in the second half of 2006 but to end the year substantially below the end-2005 level and may decline next year, providing the government adheres to the budget parameters agreed to this week.

But this third fiscal shock in six years emphasizes once again the vulnerability of Israel's public finances to unexpected and costly developments in the security situation, the agency said.

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