U.S. Government Pledges $3.8 Billion In Loan Guarantees To Israel

In a meeting on Monday between U.S. State Department and Israeli officials, the U.S. officials promised to extend loan guarantees to Israel for the next three years. The $3.8 billion in loan backing is in addition to the $3 billion a year in aid given to Israel by the U.S. government. 

Israel is the only recipient of U.S. foreign aid and loans that is not considered a ‘developing’ nation, with an annual GDP of $235 billion ($29,800 per capita). In contrast, the next biggest recipient of U.S. aid, Egypt, receives less than half of the amount given to Israel and has a GDP of $6,200 per capita. Every other recipient of US aid has a GDP that is below that of Egypt. 

The U.S. Congress recently approved a guaranteed $30 billion in aid to Israel over the next 10 years. This aid, unlike assistance provided by the U.S. government to other countries, has no requirements, and is provided without stipulation as to how it should be used. 

Reporter Richard Curtiss, with the Washington Report on Middle East Affairs, pointed out in an article on U.S. loan guarantees to Israel that these loans, made by international financial institutions and backed by the U.S. Treasury, are not actually required to be repaid. 

Curtiss writes, “Most U.S. loans to Israel are forgiven, and many were made with the explicit understanding that they would be forgiven before Israel was required to repay them. By disguising as loans what in fact were grants, cooperating members of Congress exempted Israel from the U.S. oversight that would have accompanied grants.” 

He continues, “On other loans, Israel was expected to pay the interest and eventually to begin repaying the principal. But the so-called Cranston Amendment, which has been attached by Congress to every foreign aid appropriation since 1983, provides that economic aid to Israel will never dip below the amount Israel is required to pay on its outstanding loans. In short, whether U.S. aid is extended as grants or loans to Israel, it never returns to the Treasury.” 

The announcement by the State Department officials on Monday included a promise that the loan guarantees would soon be approved by the U.S. Congress. 

An Israeli Foreign Ministry official told reporters with the Israeli daily Ha’aretz, “We consider the loan guarantees as preparation for a rainy day”. 

The U.S. Congress has received criticism in recent months for its continued aid to Israel, at a time when social programs around the US are being cut due to federal budget cuts, and states have been forced to spend down their own ‘rainy day’ funds to avoid excessive deficit spending during the ongoing economic recession in the U.S.


By Saed Bannoura | IMEMC & Agencies | January 25, 2012

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