The Carter Administration has formally notified Congress that the allocation it has made of $1.985 billion for the next fiscal year is sufficient to “meet Israel’s essential defense and balance of payments needed in the coming year.” The sum for Israel is based on the same level of military and economic aid — $1.785 billion — for the current year, plus an additional $200 million in redeployment aid.
While acknowledging that “Israel will continue to have serious problems” for “the next year or two,” the House foreign Affairs Committee’s subcommittee on the Middle East has been told that the U.S. support is a generous aid package.
Harold Sounders, Assistant Secretary of State for Near East and South Asian Affairs, offered a prepared statement to the subcommittee last Thursday in which he said that “barring unforeseen circumstances, this level of funding along with Israel’s own efforts should enable Israel to meet its priority defense requirements and to continue to enjoy a significant margin of military superiority over any combination of potential opponents.”
HOLDS OUT PROMISE TO ISRAEL
The statement noted that the U.S. budget itself has “constraint” and “cut-backs” in other programs. But Sounders held out the “promise” that “we will, however, keep this judgment under constant review in the light of developments in its region.” He said. “The Israelis fixed their aid requirements for the coming fiscal year, starting October 1, at $3.45 billion in addition to the redeployment assistance” for withdrawal from Sinai.
“There is no question but that Israel faces very serious economic problems,” Saunders said. “Escalating oil prices, the added cost of paying Egypt for oil after the return of the Alma fields and increased debt service hit Israel very hard. Israel has a potential cash flow problem resulting from its substantial military procurement plans. All of these problems have been compounded by domestic policies aimed at promoting relative rapid economic growth,” he said.
Sounders noted, however, that “For the poof two years, Israel has experienced a real growth of about five percent each year, Private and public consumption have increased as have real wages. Unemployment has dropped to below three percent. The expansion has been accompanied by searing inflation.
During 1979, inflation passed the 100 percent mark. While the foreign trade deficit haring creased rapidly, large inflows of aid and borrowing produced sizeable overall balance of payments surpluses in both 1978 and 1979 and foreign exchange reserves rose to a record high,” Sounders said.
VIEW OF ISRAEL’S SITUATION
While making these statements, the Carter Administration also acknowledged in its presentation that “the prospects for 1980 and 1981 are that Israel’s balance of payments situation will deteriorate. Oil costs, defense requirements, deployment expenses and the overheated economy will all contribute to increased pressure on the balance of payments,” Sounders’ statement said.
It noted that “In November, the government of Israel took major steps to institute a tough austerity program to cool the economy and to stimulate exports. Although it will be some time before these measures have a significant impact, they should eventually result in a situation in which Israel will be able to maintain a moderate rate of growth without serious balance of payments difficulties,” Sounders said.
The Carter Administration also notified Congress that it wants $3 million in the coming year for American voluntary agency programs on the West Bank and Gaza Strip. Sounders said that “While modest in dollar teams,” this effort to assist the economic and social development of the Palestinians in the occupied territory is a significant contribution to the peace process.”
The subcommittee was told that “the credibility” of U.S. efforts to work with Arab states in the area and “the future of our (U.S.) interests in the area are unavoidably related to our progress in moving toward a comprehensive Middle East peace — and especially to serious progress in the current West Bank and Gaza negotiations. “
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