The perennial problem of the trade deficit has been, until recently, the high price Israel has had to pay for the miracle of attaining rapid growth while successfully meeting other national challenges. This yearly gap between a high level of imports and a significantly smaller scale of exports indicated economic dependence on foreign resources. Thus, a primary policy goal - eventually reached recently - of every government was to achieve "economic independence," the point where exports will finance all imports and this deficit will disappear.
Over the first 48 years of Israel's existence, this deficit grew continuously, 45-fold (in current prices): from $222 million in 1949 to $10.1 billion in 1996. However, in relative terms, the deficit steadily decreased during that period, indicating that the problem was gradually being solved: whereas in 1950 exports financed only 14 percent of imports, in 1960 this ratio was 51 percent, and in 1996 it stood at 79 percent. Since then the actual deficit began declining, down to $4.7 billion in 2001 and to a mere $0.7 billion in 2005, representing less than one percent of total trade.
Over the past 61 years, Israel has required around $US 176 billion (in current figures) to cover all its annual trade deficits. Almost two thirds of this accumulated deficit was covered by unilateral transfers, such as funds brought in by immigrants, foreign pensions, donations from Jewish fund-raising organizations abroad to institutions of health, education, and social services, and grants from foreign governments, especially from the United States. The rest was financed by loans from individuals, banks, and foreign governments, which Israel has been repaying since its early years.
That is why the national external debt increased every year until 1985, when, for the first time, less was borrowed than was paid back. This positive trend reverted for a few years until the net national external debt reached a new high of $20.8 billion in 1995. During the past decade it diminished considerably, down to zero, and since 2002 it is becoming growingly positive - namely, Israel is a creditor - with "the world" owing it more than Israel owes the world, with a net difference of $50 billion in 2010.