A dispute between the Finance Ministry and the Bank of Israel has frozen the money earmarked for immigrant absorption that the United States helped secure by providing billions of dollars in loan guarantees.
The disagreement may have already cost Israel millions of dollars.
State Comptroller Miriam Ben-Porat is reported to have swooped down on the Treasury and taken away bundles of documents to help in her office’s probe of the dispute.
The Treasury apparently wanted to use the money secured with the loan guarantees to help companies wishing to invest in new infrastructure projects or to expand their investments in existing projects of that type.
But the Bank of Israel objected to the Treasury’s direct involvement in determining who should receive the money.
As a result, a considerable part of the money has been left on deposit abroad for a period far longer than initially anticipated.
The much sough-after loan guarantees were offered to Israel by the Bush administration after a protracted and bitter fight with the American Jewish community.
They were secured at a relatively high rate of interest – in the region of 7 percent annually – while the interest being paid on the current deposits abroad is at a lower short-term rate of only some 3.5 to 4 percent.
Banks of Israel figures issued last week indicate that of the $3 billion that Israel raised on the U.S. money market, only some $800,000 have so far been disbursed, leaving $2.2 billion unused.
The Treasury claims that the U.S. guaranteed loans are being spent daily as the general Israeli public and the business sector buy foreign currency to finance investment and the import of capital goods needed to push economic growth at an accelerated pace.
According to a report in the Hebrew daily newspaper Ha’aretz, the Treasury explains that the drain on foreign currency reserves is being financed by loans that the U.S. funds are guaranteeing.
As a result, said the Treasury, Israel is getting credit on the best possible terms available in the world’s money markets.