The Palestinian Authority is considering serious budget and welfare cuts, hoping the move to limit civil services to its Palestinian population will force Israel to retreat from its plan to annex parts of the West Bank by July 1.
Hussein al-Sheikh, a senior Palestinian official and close adviser to PA President Mahmoud Abbas, told The New York Times on Monday that the Palestinian government in Ramallah will not continue to provide civil services if Israel’s planned annexation of large portions of the West Bank moves forward.
Al-Sheikh said the PA was also withholding the $105 million it sends to the Gaza Strip each month, much of which is also used to pay the salaries of public sector employees. All of these steps, al-Sheikh indicated, were part of a strategy to exert pressure on Israel and force it to back down from annexation.
“Either they backtrack on annexation and things go back to how they were, or they follow through with annexation and they go back to being the occupying power in the whole West Bank,” al-Sheikh said. “I will not accept that my role is a service provider. I’m not a municipality or a charity.”
The PA has already begun curbing its cooperation with Israel, which includes facilitation of permits for Palestinians to receive medical treatment at Israel’s better equipped facilities or to enter Israel for other reasons, al-Sheikh said. The PA last month said it was ending security cooperation with Israel.
Annexation could return all the parties to the situation that preceded the 1993 Oslo Accords, when Palestinian Liberation Organization chairman Yasser Arafat recognized Israel’s right to exist, PA Prime Minister Mohammad Shtayyeh said on Saturday.
“In the event of annexation, withdrawing our recognition of Israel will be on the table,” Shtayyeh said.
While annexation may be the source of the current crisis, the PA has another reason to curb its spending on civil services: a deepening fiscal crisis that may have left it unable to pay its employees.
In an interview with Palestine TV on Saturday night, Shtayyeh said the PA’s Finance Ministry had not determined whether the PA had enough money to continue dispensing government salaries.
“Whether government salaries will be paid out depends entirely on our financial capabilities…If we can, we will pay them. If not, we will have to wait,” Shtayyeh said.
Many West Bank Palestinians work in the public sector and receive a government paycheck. According to the World Bank, PA government salaries account for approximately 15-20 percent of GDP.
Shtayyeh did not say whether or not the uncertainty includes the monthly stipends to the families of Palestinians convicted by Israel of terrorism, which the PA has publicly and repeatedly pledged to safeguard.
Over the last few weeks, the fiscal crisis in the PA has deepened. The coronavirus pandemic caused significant damage to the West Bank economy, with the World Bank predicting on Monday that the Palestinian economy could shrink as much as 11% in 2020. The Bank projected the PA’s financing gap to increase over $1.5 billion in this period.
Last week, the PA announced that it would refuse to accept the tax revenues on imports and exports that Israel transfers to the PA. In 2019, tax revenues transferred to the Palestinian Authority by Israel accounted for approximately 60% of the Palestinian budget. The PA said the move was part of the end of coordination with Israeli authorities due to repeated Israeli violations of past treaties and agreements.
A proposed NIS 800 million loan by Israel to the PA, which could have helped avoid the budgetary chasm, was also off the table, Shtayyeh said.
“As soon as we announced that we were absolved of all of our treaties with Israel, that agreement instantly became null and void as well from our perspective,” Shtayyeh said of the loan Monday night.