The Finance Ministry announced Tuesday that the United States has re-approved its Israel loan guarantee program of $9 billion over three years. The program was initially launched in 2003.
"Re-approval of the loan guarantees shows significant faith in Israel's economy by the U.S. government," said Finance Ministry Director-General Yarom Ariav in a statement after signing the agreement.
At the time, the U.S. Congress approved the loan guarantees to help Israel deal with a devastating economic crisis caused by a wave of Palestinian Authority terror attacks, and to handle anticipated defense and economic costs associated with the war in Iraq.
Under the terms of the program, no funds are transferred to Israel. The U.S. government co-signs loans for Israel which gives bankers confidence to lend Israel money at more favorable terms. In return, Israel pays several hundred million dollars in annual fees to cover administrative and other costs. Borrowed funds must be used within the pre-1967 borders and it is agreed that the amount of the guarantees can be reduced by an amount equal to Israel's expenditures on settlements in the territories.
The first U.S. loan guarantee of $400 million was extended to Israel in 1990 to help absorb the wave of immigrants from the former Soviet Union which skyrocketed from fewer than 13,000 people in 1989 to more than 185,000 a year later. When the flood of refugees proved greater than anticipated, with tens of thousands arriving each month, Israel asked for an additional $10 billion in guarantees which was granted in 1992 in increments of $2 billion over five years.