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U.S. Aid to Israel

December 7, 1978
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The United States has eased its usual restrictions in foreign aid programs under its new agreement with Israel, an Agency for International Development (AID) spokesman said. Referring to the agreement signed Dec. I by the U.S. and Israel which provides Israel with $785 million during fiscal year 1979 that started Oct. I, the spokesman noted that this is the first time the funds were not tied to prescribed procurements and the grant ratio is, for the first time, twice the amount that is a loan.

The agreement consists of a loan for $260 million and a grant of $525 million. The first of four quarterly installments will be released within a week to Israel.

“The U.S. assistance to Israel is considered to have a stabilizing effect in the region,” a statement issued by AID said. “It is a tangible reaffirmation of the American commitment to Israel’s security and well being that has been reaffirmed by every U.S. administration for the past three decades.”

AID said that the loan portion of the program will be repaid by Israel in 40 years with a grace period of 10 years. Interest will be two percent annually during the grace period and three percent thereafter. The statement said that Israel gave assurances that it will maintain civilian imports from the United States at a level at least equal to the U.S. economic assistance level and that U.S. exporters will continue to have equal access to Israeli markets.

“Israel, a small country of 3.6 million people, lacks significant natural resources and has to rely on foreign sources of supply,” the AID statement said. “A heavy defense burden and the spiraling cost of imports have led to balance of payment deficits since 1973. The country’s foreign debt stands at about $12 billion.”

The Israeli government has applied stringent austerity measures in an effort to correct its balance of payment problems, the statement added. “These measures, undertaken in conjunction with U.S. government and private assistance, are showing results. While continuing to monitor its balance of payment problems closely, Israel is now finding it possible to adopt policies which encourage a more rapid rate of economic growth.”

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