Two months after a massive deficit was revealed at Israel Railways, the company has signed on to a rescue plan with the Finance Ministry.
Treasury officials have authorized state-owned Railways to take loans immediately totaling NIS 500 million from the company value-added-tax fund. The fund collects VAT refunds due it from development projects.
The company will use the proceeds to pay suppliers and salaries, and to cover bank loans.
The treasury loan, which will entail interest of 4% to 5%, will run for several years, with the initial principal payments due to begin in another 18 months. In exchange, Israel Railways has agreed to undertake an efficiency program and to begin talks with the finance and transportation ministries on a new subsidies agreement.
