Summary: Israel was expected to certify in February 1992 that it used the $400 million in U.S. loan guaranty to finance more than 12,000 loans valued at about $425 million for Soviet immigrant housing mortgages within Israel's pre-1967 borders. Such use would be consistent with the key provisions of the guaranty. Because of the fungibility of the money, however, other Israeli government funds were made available for use as the government determined, including use in the occupied territories. Under the terms of the loan guaranty, Israel agreed to provide periodic data on its spending in the occupied territories and settlement activities. So far, however, Israel has provided no information on spending in the occupied territories and only incomplete information on settlement activities. Israel does not require Soviet immigrants to settle in the occupied territories, and it does not offer special incentives for them to do so. However, Israel's stated policy is to encourage such settlements in general, and it offers many incentives and allowances for this purpose to all Israelis, including Soviet immigrants. The State Department estimates that as many as 8,800 of the Soviet immigrants who entered Israel in 1990 have settled in the occupied territories, including East Jerusalem. According to GAO, Israel's estimate is reasonable that about one million Soviet Jews will immigrate to Israel during the current wave. No consensus exists, however, on how quickly this level will be reached. GAO projects that if the United States provides the $10 billion in loan guaranties Israel has requested, Israel will be able to fully service its external debt and to continue its past record of payment under most foreseeable circumstances. Yet the large size of these guaranties makes them more risky to the U.S. government. The more fully and rapidly Israeli economic reforms are adopted and the more closely Israel follows its strategy to employ new immigrants in the private rather than public sector, the stronger Israel's ability to repay the loans will be.
