Israel has $4.9 billion in unused loan guarantees, according to figures from the Ministry of Finance Accountant General Debt Management Unit. At the request of the White House, in 2003 Congress approved $9 billion in loan guarantees to be used in 2003-05.
In 2005, at the specific request of the Israeli government, the US agreed to extend the loan guarantees program through the end of 2008, because Israel did not need the money at this time, after cutting its budget deficits and projected significantly higher revenue from taxes and privatization.
Yesterday’s leaks about the visit by a delegation of directors general to Washington to discuss the disengagement implied that the $2 billion in aid that the US will give Israel for financing the disengagement plan and for development of the Negev and Galilee would only partly comprise a grant. Most of the grant will be for moving IDF bases from the Gaza Strip to Israel and other defense costs. Most of the aid will be in the form of loan guarantees, which Israel can use to raise money on international capital markets.
This means that the unused loan guarantees, together with an additional $1-1.5 billion in expected new guarantees over the next three-four years, add up to $5.9-6.4 billion through the end of 2009.
Raising money backed by the loan guarantees in 2000-04 increased Israel’s net foreign debt by 13.6%, or $3.7 billion, to $30.9 billion. If the existing and expected loan guarantees are used in full, Israel’s external debt could grow by an additional $6.4 billion, amounting to 6% of GDP.
Published by Globes [online], Israel business news - www.globes.co.il - on July 13, 2005