What the balance of payments says about the shekel
This week’s explainer in Globes, produced with the Center for Citizen Empowerment, focuses on the balance of payments and why it matters for the shekel. The Central Bureau of Statistics is due to publish the balance-of-payments report for the first quarter of 2026, one of the indicators that most influences the exchange rate.
The balance of payments is a summary of all economic transactions between Israel and the rest of the world over a given period. It is split into three main accounts, the current account, the capital account and the financial account. The current account records trade in goods and services, income from work and investments, and current transfers. The capital account records capital transfers and transactions in non-produced, non-financial assets. The financial account records direct investment, securities investment and other cross-border investments.
The article notes that the current account records inflows from abroad as positive, while the financial account records purchases of foreign assets as negative, so the two sides must balance. Professor Yosef Zaira, in his book “Israel’s Economy,” says a current-account deficit means Israel is reducing its foreign-exchange reserves or increasing its external debt. That is economically harmful because higher external debt can force Israel to borrow on global capital markets at relatively high interest rates, and it also creates greater political dependence.
For most of Israel’s history, the balance of payments showed a large deficit, reflecting imports far exceeding exports. Since the early 2000s, however, Israel has had a growing current-account surplus. A common explanation is the success of the high-tech sector, but Zaira argues the picture is more complex and that the improvement in the balance of payments came not from stronger exports, but mainly from lower imports. Bank of Israel data also indicate that much of the export growth in 2025 came from Israeli companies owned by foreign interests, which are excluded from the current account.
