Israel Okays $9 Billion Defense Loan, Despite Criticism From Attorney General

Yaniv Kubovich
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U.S. soldiers on an F-35 at a base near Abu Dhabi in 2019
U.S. soldiers on an F-35 at a base near Abu Dhabi in 2019Credit: AFP
Yaniv Kubovich

The ministerial committee for procurement approved a $9 billion  loan by the Israel Air Force on Sunday, despite the attorney general's original objections to the deal due to the absence of support from the Finance Ministry throughout the process.

During Sunday's ministerial procurement committee hearing, Avichai Mendelblit said that this is a problematic legal move, but added that he would be able to defend the committee's decision at the High Court of Justice if a petition is filed on the matter.

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Approximately $6.4 billion of the $9 billion loan will be used to finance the acquisition F-35 squadrons, cargo planes, helicopters and advanced weapons, mostly from the United States.

The remaining funds, some $2.4 billion, will be used to refinance a loan taken by the IDF in 2014 to finance large purchases from the United States, mainly aircraft. Then, the Defense Ministry took out a bridge loan of about $2 billion dollars from U.S. companies, under the helm of aircraft manufacturer Lockheed Martin, which sold 50 F-35 warplanes to the Israel Air Force.

Although U.S. aid covered most of the budget for the implementation of the Air Force's defense procurement program, funds needed to be borrowed to cover costs.

Now, contrary to Mendelblit's initial stance, the IDF has received approval to take out a loan of 2.4 billion shekels to refinance that very same loan. Under the Budget Foundations Law, government ministries may not take out external loans for programs that exceed budgetary frameworks without the approval of the Accountant General. Mendelblit initially supported objections raised from within the Finance Ministry about the IDF's taking out such a loan.

In recent years, the Finance Ministry's position has been that such loans contravene the Budget Foundations Law, according to which the only entity that can borrow money on behalf of the State of Israel is the government debt unit, which is subordinate to the Finance Ministry's Accountant General. This stance remains unchanged, and there is now concern that the recent developments will usher in a wave of more government ministries demanding to take out loans for programs that exceed budgetary frameworks.

The IDF, on the other hand, claims that there is an operational and security need that requires special approval. According to the army, the IDF's helicopters and refuelers are already operating several years beyond the manufacturers' recommended time frames and there is a real threat to the pilots' safety. This position is also reflected in State Comptroller reports, which state that the military's aging fleet of helicopters puts the pilots lives at risk.

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