USAID Cash Transfer to Israel

USAID PROGRAM: Israel
PROGRAM TITLE: Israel Cash Transfer (Pillar: Economic Growth, Agriculture, and Trade)
STRATEGIC OBJECTIVE AND NUMBER: Support Policy Reform for Financial Stability, 271-001 (271-K-641)
STATUS: New
PLANNED FY 2002 OBLIGATION AND FUNDING SOURCE: $720,000,000 ESF
PROPOSED FY 2003 OBLIGTION AND FUNDING SOURCE: $600,000,000 ESF
INITIAL OBLIGATION: FY 2002      ESTIMATED COMPLETION DATE: FY 2002

Summary: The overall goal of U.S. assistance to Israel is to support peace in the Middle East. The Government of Israel’s political and economic stability continues to be important to U.S. foreign policy objectives in the Middle East.

Inputs, Outputs, and Activities: FY 2002 Program: USAID will provide FY 2002 funds as a cash transfer to Israel that will be used mainly for debt repayment to the United States, including re-financed Foreign Military Sales debt, and purchases of U.S. goods and services.

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 U.S. continues to encourage 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.

On December 31, 2001 the U.S. Government obligated a partial cash transfer in the amount of $149,917,000, given the absence of a full ESF appropriation for FY 2002. On February 8, 2002, the Government of Israel received the outstanding balance, for a total amount of $720,000,000 in economic assistance.

FY 2003 Program: USAID anticipates a cash transfer of $600,000,000.

Performance and Results: From a macroeconomic perspective, the grant results in increased importing capacity simply because Israel has greater economic wealth. Between 1984 and 2000, imports of U.S. non-military goods showed impressive gains, increasing 378% from $1,756,200,000 to $6,645,500,000. While economic assistance to Israel has declined since 1999, nonmilitary imports from the U.S. continue to increase, reaching $3,926,600,000 in the first half of 2001. On an annual basis, this represents a 59% increase over the 2000 level of $6,645,500,000, and exceeds Israel’s commitment under the FY 2001 Cash Transfer Agreement.

Principal Contractors, Grantees, or Agencies: The Israel Cash Transfer is accomplished by a direct grant to the Government of Israel.

US Financing in Thousands of Dollars