Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
ISRAEL
FY 1997 FY 1998See footnote 1 FY 1999 Actual Estimate Request Economic Support Funds............. $1,200,000,000 $1,200,000,000 $1,200,000,000
Introduction
The overall goal of U.S. assistance to Israel is to support the furtherance of peace in the Middle East, initiated at Camp David when Egypt and Israel signed the Peace Accords. The process moved forward with Israel's signing of the Declaration of Principles with the Palestinians on September 13, 1993 and the Interim Agreement on September 28, 1995, and the signature of the Peace Treaty with the Jordanians on October 17, 1994. Israel remains the only country in the region with a fully democratic form of government.
Israel's economy has responded favorably in recent years to the restructuring imposed after the crises and hyper-inflation of the mid-80's. Economic growth has averaged six percent since 1990, as the economy becomes increasingly sophisticated and technologically advanced. GDP growth in 1995 was about 6.8 % and unemployment declined to 6.3 % from 1992 levels of 11%. Despite this good news, however, the government still faces economic challenges associated with absorbing over 600,000 immigrants since 1989 in a country of only five million. Its political and economic stability, stressed by the recent absorption of vast numbers of immigrants, continues to be important in furthering the U.S. foreign policy objective of supporting the Middle East Peace Process.
Concurrently, the unanticipated and substantial expenditures associated with the implementation of the peace agreements with the Palestinians and Jordan have exacerbated Israel's domestic budget deficit. U.S. assistance provides Israel the funds it needs both to promote economic reforms and to carry out a domestic agenda that reinforces the government's peace process policy.
Development Challenge
There has been some success by the Government (GOI) in stabilizing the economy of Israel, in spite of the massive inflow of immigrants, which has increased the population by about two percent per annum. Since 1993, employment has risen, export competitiveness has improved, and inflation has been reduced. Expanding business investment and governmental infrastructure investment coupled with sustained export growth are projected to maintain the gross domestic product growth rate at about five percent.
To strengthen the economy, more work is needed to liberalize and restructure the large public sector. Continued expenditure reductions and privatization of public sector enterprises are needed, but political obstacles remain.
Other Donors
The United States remains the largest bilateral donor. Germany, France, the Netherlands and Switzerland are also major contributors.
FY 1999 Program
The structure of the USAID program for Israel is atypical of other USAID assistance programs in that there is neither projectized assistance nor USAID staff in Israel for this program. Rather, the program supports the implementation of the historic Camp David accords and provides Israel with an annual cash transfer. Hence, there are no structured specific objectives.
The fundamental USAID objective in Israel is to reduce Israel's balance-of-payment pressures as it continues to pursue the economic reforms required for financial stability and structural adjustments needed for rapid sustainable growth. Though the U.S. cash transfer is not conditioned on economic policy reform, the ongoing U.S. State Department-chaired Joint Economic Development Group encourages Israeli reforms to reduce government spending and deficits, to improve tax and public wage structures, to increase privatization, to reform labor markets and to continue to liberalize its trade regime. The cash transfer is used by Israel primarily for repayment of debt to the United States, including Foreign Military Sales debt, and purchases of goods and services from the United States.
By supporting and maintaining the peace process, the program encourages more investment and economic activity, thereby contributing to increased foreign exchange earnings. The GOI's resultant ability to forge new relationships with its neighbors provides further stimulus for exporting goods. Eased border crossings, another result of the peace process, also promise new sources of tourists and export markets.
ACTIVITY DATA SHEET
PROGRAM: Israel
TITLE AND NUMBER: Israel Cash Transfer. 271-K638
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999: $1,200,000,000/ESF
INITIAL OBLIGATION: FY 1999 ESTIMATED COMPLETION DATE: FY 1999
Purpose: To support policy reforms required for financial stability and structural adjustments needed for rapid sustainable growth.
Background: The overall goal of U.S. assistance to Israel is to support the furtherance of peace in the Middle East, initiated at Camp David when Egypt and Israel signed the Peace Accords. Israel remains the only fully democratic government in the region. Its political and economic stability, stressed by the recent absorption of vast numbers of immigrants, continues to be important in furthering U.S. foreign policy objectives in the Middle East.
USAID Role and Achievements to Date: The fundamental USAID objective in Israel is to reduce Israel's balance-of-payment pressures as it continues to pursue the economic reforms required for financial stability and structural adjustments needed for rapid sustainable growth. Though the U.S. cash transfer is not conditioned on economic policy reform, the ongoing U.S. State Department-chaired, Joint Economic Development Group encourages Israeli efforts to reduce government spending and deficits, improve tax and public wage structures, increase privatization, reform labor markets and continue to liberalize its trade regime.
Description: FY 1999 funds will be provided as a cash transfer and will be used by Israel primarily for repayment of debt to the United States, including Foreign Military Sales debt, and purchases of goods and services from the United States.
Host Country and Other Donors: The United States remains the largest bilateral donor. Germany, France, the Netherlands and Switzerland are also major contributors.
Beneficiaries: The Government of Israel is the primary beneficiary.
Principal Contractors, Grantees, or Agencies: The transfer is accomplished by a direct grant to the Government of Israel.
Major Results Indicators: By supporting and maintaining the peace process, the program encourages more investment and economic activity, thereby resulting in increased foreign exchange earnings. The GOI's resultant ability to forge new relationships with its neighbors provides further stimulus for exporting goods. Eased border crossings, another result of the peace process, also promise new sources of tourists and export markets.
ISRAEL
FY 1999 PROGRAM SUMMARY
(in Thousands of Dollars)
USAID Strategies and Special
ObjectivesEconomic
Growth &
Agriculture
Population &
Health
Environment
DemocracyHuman
Capacity
Development
Humanitarian
Assistance
TOTALSS.O 1. Support policy reforms for financial stability and structural adjustments needed for rapid sustainable growth
- ESF
1,200,000
1,200,000
Total ESF 1,200,000 1,200,000
Office of Middle East Director: Kimberly Finan
Footnote: 1 The program described does not reflect the funding levels under discussion, for which plans are not yet completed; details on the program will be provided if and when approved.
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