The annual military aid that Israel receives from the US will increase by $600 million, concurrent to the phasing out of the civilian aid package, apparently starting in the year 2000. The greater part of the military aid addition will be shekel convertible, that is the IDF (Israel Defense Forces) will be able to use it for military procurements in Israel.
This summarizes the agreement Finance Minister Yaakov Ne’eman reached in talks with legislators and government officials in Washington, yesterday and the day before, on the arrangements for a phasing out of civilian aid, to be completed in ten to twelve years.
In other words: Israel’s military aid package will amount to an annual $2.4 billion. From the current package, which amounts to $1.8 billion annually, $475 million are shekel convertible. Together with the addition, the IDF will be able to channel more than $1 billion annually to Israeli defense industries, under its replenishment programs.
Sources involved in the subject said that the addition is likely to inject considerable encouragement to Israeli defense industries, in view of the instances in which the IDF was forced to purchase items in the US, due to a shekel shortage. For example: Just this month, it was learned that the IDF would buy 45 "Popeye" missiles, developed and manufactured by Rafael at the US plant in Alabama, jointly owned by Rafael and Lockheed Martin, inter alia, due to the availability of dollars (from US aid)
which can be used solely in the US, and a shortage of shekels.
Explaining his motives for the initiative at this time, Ne’eman said it was difficult to justify multi-year economic aid to Israel, whose economy is considered developed and whose per capita annual income is $17,000 (for the sake of comparison - in Britian it is just over $19,000).
"We thoroughly reviewed the problem and I can tell you that Israel can withstand the process of a cut in the civilian aid package, without it damaging the economy," said Ne’eman. "It is preferable for us to initiate such a move than have it imposed on us in the future."
Published by Israel's Business Arena January 29, 1998