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U.s.tries to Clarify Debt Moratorium Issue: Administration Says Israel Could Delay Repayment of $500

The Reagan Administration asserted today that Israel could postpone repayment of $500 million in debt to the United States without asking for American approval although the Administration feels this step will not be necessary.

Under the law which provided U.S. loan aid to Israel “there can be late payment if viewed as necessary, “State Department deputy spokesman Alan Romberg said. He added that this would mean additional interest costs.

Romberg was trying to clear up the confusion that occurred yesterday when Israeli Premier Shimon Peres was reported as telling his Cabinet that during his visit to Washington last week, the Administration agreed to a postponement of the repayment for three months. However, Administration officials said no agreement was made, although several means of dealing with Israel’s economic problems were discussed.

STATEMENT BY SHULTZ

Romberg pointed to a statement made by Secretary of State George Shultz, en route to Toronto last night, when he was asked about the Israeli statement. Shultz noted that Israel’s cash flow problem is “immediately benefited” by the Administration’s agreement to provide Israel with the $1.2 billion in economic grants for 1985 “up front” in the beginning of the fiscal year which started October I rather than through the regular quarterly allocations.

“The basic cash position is vastly improved by that very fact, and so we will look at the flow of funds and go in for that analysis, “Shultz said. “I think if the strong steps are taken (control the economy) as Mr. Peres outlined there shouldn’t be any problems.

Shultz added that “various ways” were discussed with the Israelis “in which any potential problem may be met. And of course, loan repayments is one way to get at cash flow. And there are some other ways. But my own opinion is that it won’t be necessary to take additional steps.”

Romberg refused to discuss any of the suggestions that the Administration may have made during Peres’ visit. However, Administration officials noted that the existence of the provision in the law to delay loan repayments was pointed out to the Israelis. But they stressed that there was no agreement that this would be done.

If the payment is delayed for three months the new Congress would then be in session and additional aid to Israel is expected to be approved, which would cover the $500 million repayment.

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