PA on brink of financial crisis if donors don’t step in, report warns
World Bank calls for Israel to ease West Bank restrictions to allow Palestinian economy to flourish, says less than half of the billions pledged to Gaza have reached battered enclave
The Palestinian Authority is nearing a financial crisis if donors do not to step in to fill a shortfall of over half a billion dollars, the World Bank warned in a report published Thursday.
The report, to be presented in New York next week to a meeting of the Ad Hoc Liaison Committee, which coordinates international donor support for the Palestinians, also said that less than half of the $3.5 billion pledged by donor states to rebuild the Gaza Strip after the 2014 war between Israel and Hamas has been doled out.
The report on the Palestinian economy urged international donor support to stave off a crisis in the Palestinian Authority and maintain Palestinian budget-cutting achievements.
“The PA’s finances remain fragile with declining budget support leading to a projected financing gap of about $600 million (530 million euros) in 2016,” the report said.
“In the short term, donor support and in particular budget support is essential to avoid a fiscal crisis leading to wider economic problems,” the report said.
Over the past 10 years the Palestinian Authority slashed its deficit by an amount equal to 15 percent of its gross domestic product, “an achievement rarely seen in other places around the world,” the report said.
Yet it said Ramallah could not close the gap on its own “particularly since local borrowing opportunities are now largely exhausted.”
It said that the Palestinian economy would remain hobbled as long as the conflict with Israel continued, “but meaningful steps can avoid further deterioration.”
Recent Israeli decisions to increase the quota of Palestinian laborers working in Israel were praised by the bank but the report said the Jewish state still needed to scale back on measures that stifle the Palestinian economy.
It noted the 27% unemployment in the Palestinian territories is partly due to low Palestinian employment in Israel. Before the Second Intifada in 2000, Israel employed close to a quarter of the Palestinian labor force.
Additionally, the Palestinian Authority has one of the lowest levels of private investment in the world due to Israeli security and bureaucratic measures, the report argued. It suggested Jerusalem scale back restrictions on Palestinian business ventures, especially in Area C of the West Bank, which is under Israeli civil and military control.
The Bank argued that access to economic activity in Area C could increase the Palestinian GDP by as much as 35%. The majority of this impact would stem from agriculture and Dead Sea minerals processing industries, the report said.
Gaza donations not coming through
On Gaza, the World Bank reported that just 46 percent of the $3.5 billion pledged in the aftermath of the conflict for the Palestinian territory’s reconstruction has been realized.
The Strip was battered in a July-August 2014 war between Israel and the Hamas terror group which rules the coastal enclave. An Israeli ground incursion followed after airstrikes failed to halt the rocket fire emanating from the Strip aimed at Israeli civilian targets.
The fighting destroyed or damaged thousands of homes and left tens of thousands homeless in Gaza, where fighters had embedded rocket launchers and other military infrastructure in residential neighborhoods.
Reconstruction has been painfully slow. A mere 16% of the plan to restore Gaza after the war has been completed, the report found.
“Only 10.7 percent of the 11,000 housing units that were totally destroyed in the war have been rebuilt to date, and about 50 percent of partially and severely damaged houses still need to be repaired.”
“The situation in Gaza is of great concern and the conditions required for post-reconstruction sustainable economic growth are not being put in place,” the organization’s West Bank and Gaza country director, Marina Wes, wrote.
“Over 70,000 people are suffering from prolonged internal displacement,” she noted.
