Erroneous Report on Loan Funds Triggers Concern in Washington

A newspaper report that the Israeli government planned to use some of the American loan guarantee money for building roads in the West Bank and Gaza Strip has prompted worried calls from the U.S. administration and denials from Israeli officials.

The Jerusalem Post reported this week in a front-page exclusive that the Construction and Housing Ministry was embarking on a “revolutionary” project to build highways from inside the territories to Israel’s sea and airports.

The budget for the project, according to the article, projected $480 million for the first year, to come primarily-from U.S. loan guarantees. The information was attributed to Aryeh Mizrachi, the ministry’s director-general.

The story apparently was not well-received by the Clinton administration, since U.S. policy precludes spending the loan money outside Israel proper.

The story apparently triggered a call from administration officials to Finance Ministry officials here, who then sought an explanation from the Housing Ministry.

A Finance Ministry spokesman said Sunday that the newspaper misunderstood Mizrachi, who was intending to outline a broad picture of a future regional economy once Palestinian autonomy in the territories is realized.

Meanwhile, blanket denials of the report were issued by the two ministries and the Prime Minister’s Office.

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