Loan guarantees agreement will prevent rating downgrade

The rating companies are expected to upgrade their outlooks. The Ministry of Finance director general said the delay had not been politically motivated.

The loan guarantees agreement signed yesterday by Israel and the US will prevent the downgrading of current Israel’s A minus credit rating.

Senior Jerusalem economic sources predicted that for the first time in the past 30 months, several international rating agencies would even upgrade their credit rating outlooks for Israel, if the hudna (ceasefire) continued and the government reduced the budget deficit.

Israel’s large $24 billion foreign currency reserves also support an improved credit rating.

Ministry of Finance director general Ohad Marani publicly commented today on the agreement signed yesterday. He said that the delay in signing the agreement was due to the summer vacations of Washington officials, and the need for lawyers to prepare the necessary documents.

Marani added that there had been no political reason for the delay. “Everything said in the media concerning the separation fence, that the loan guarantees agreement would not be signed until Israel did what some people thought the US wanted us to do, proved to be wrong,” Marani stated. “The delays were at a much lower level, and were a result of summer vacations in Washington.”

Marani confirmed that a special mechanism for reporting and deducting Israeli government investments beyond the Green Line from the loan guarantees had indeed been agreed. He declined to comment on the question of whether the mechanism applied to the separation fence. NIS 1.5 billion has already been budgeted for this item.

”Everyone understands that the separation fence is important: not just for security, but also for the economy. I hope the separation fence does not cause friction. I am unable and unwilling to talk more about it right now. We’ll talk again after the US decides whether to make deductions, and how much. I don’t want to talk about it. I prefer to leave it to discussion forums with the US,” Marani explained.

Marani also confirmed that the recession had not ended yet, and that recovery depended on the implementation of the economic plan.

Published by Globes [online] - - on August 21, 2003

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