U.S. to vet Israeli policies before deciding on loan guarantees

Special to World
Monday, February 23, 2004

TEL AVIV The United States plans a review of Israel's economic performance to determine whether another $3 billion in loan guarantees should be issued to the Jewish state.

Envoys from the two countries will meet in Jerusalem on Monday under the Joint Economic Development Group in an effort to review Israel's spending policy, including that in the West Bank and Gaza Strip. The panel was established to review Israel's economic plans and ensure that they met the terms of the loan guarantee agreement.

The U.S. delegation will be led by Undersecretary of State for Economic Affairs Alan Larson, who will also visit Egypt, Jordan and the Palestinian Authority. Officials said the U.S. delegation will urge Israel to reduce spending in Israeli communities in the West Bank and Gaza Strip.

In 2003, the United States approved the first portion of the $9 billion of loan guarantees. Israel used $1.6 billion to obtain loans at preferred rates.

U.S. officials said the loan guarantees have been dependent on the implementation of an economic recovery plan approved by Washington that would encourage competition, accelerate privatization, and bring public spending under control. Another condition stipulated the bolstering of intellectual property rights protection.

U.S. ambassador to Israel, Dan Kurtzer, said Israel's economy has become much healthier over the past year. He cited an improvement in Israel's credit rating, the reduction of long-term interest rates and the doubling of direct foreign investments.

"Some problems remain, especially Israel's high poverty and unemployment rates, and a stubborn budget deficit," Kurtzer said on Feb. 10. "Deeper cuts on spending in some sectors for example, settlement activity are necessary."

Kurtzer urged Israel to streamline and improve the tender process, including increasing transparency and shortening the time for an award. He said government tenders have been revised to favor Israeli companies

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