The composition of the government debt Additional damage is caused to the economy, not deriving directly from the existence of the deficit but from the fact that almost half of the government’s domestic debt is not tradable. As the government moves to raising unindexed loans, the share of its tradable indexed debt in its total debt falls.
In 1995 it made up 30 percent of the total debt; in the middle of 2001, it is down to 23 percent. The market for tradable indexed government bonds is drying up, and that is the market which determines the longterm rate of interest in Israel. A two-pronged course of action is required: 1.