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UN urges Israel, PA to jointly address ‘dire’ Palestinian economic crisis

Report accuses Israel of ‘contributing to the crisis’ by withholding portion of tax revenues it collects in order to offset sums PA pays to security prisoners, including terrorists

Palestinians walk in front of a currency exchange counter in the West Bank city of Ramallah on October 5, 2021. (ABBAS MOMANI / AFP)
Palestinians walk in front of a currency exchange counter in the West Bank city of Ramallah on October 5, 2021. (ABBAS MOMANI / AFP)

A new report released by the United Nations on Thursday urged immediate action “to address the continuing economic and fiscal crisis” among the Palestinians.

The report, issued by the United Nations Special Coordinator for the Middle East Peace Process, said the financial situation in the Palestinian territories was “dire,” citing economic stagnation and persistently high unemployment.

It called on Israel, the Palestinian Authority and the international community to work together in the coming months to address the situation.

The report also blamed Israel for “contributing to the crisis” by withholding a portion of the tax revenues it collects in order to offset the amounts the PA pays to imprisoned Palestinian security prisoners, including convicted terrorists.

“It is increasingly difficult for the PA to cover its minimum expenditures, let alone make critical investments in the economy and the Palestinian people,” said United Nations special coordinator for the Middle East peace process, Tor Wennesland, in a statement released along with the report.

The report was released for next week’s meeting in Norway of the Ad Hoc Liaison Committee, a group of major donors to the PA.

International observers have expressed concern than an increasingly cash-strapped Ramallah could face financial collapse. The PA’s budget deficit is expected to reach $1.36 billion in 2021, according to the United Nations.

According to publicly available PA filings, Ramallah has received just $31.7 million in total foreign budget support so far this year. The figure contrasts sharply with 2019, when the PA had received $446 million by the end of August.

Palestinian men gather to apply for work permits in Israel, at Jabaliya refugee camp in the northern Gaza Strip, on October 6, 2021. (Mahmud Hams/AFP)

Most PA funding comes from customs taxes that Israel collects on its behalf. Foreign aid has historically made up the shortfall — ranging between 20 and 30 percent of the annual budget — although more and more countries have hesitated to provide budget support in recent years.

Israel confiscated NIS 600 million ($192 million) from the taxes it transfers to Ramallah in July. Under a 2018 Israeli law, Israel regularly confiscates money from the revenues to penalize Ramallah for its policy of paying stipends to Palestinian security prisoners held in Israel, and the families of Palestinians killed during violent confrontations with Israeli forces — including those who committed terror attacks against Israelis.

As the prospect of a Palestinian fiscal crisis loomed in late August, however, Defense Minister Benny Gantz announced that Israel would loan back NIS 500 million, effectively circumventing the law.

Earlier this month, the World Bank said that the economy in the Palestinian Territories was showing “signs of recovery” but still faced serious challenges including “very high unemployment and deteriorating social conditions” in Gaza.

In the first half of 2021, growth reached 5.4 percent, and was expected to reach 6% this year, the World Bank said in a report. However, growth in 2022 was predicted to slow to around 3%.

Women shop next to the rubble of destroyed buildings hit by Israeli airstrikes during an 11-day war between Gaza’s Hamas rulers and Israel, at the main shopping road in Gaza City, Thursday, Sept. 23, 2021. (AP/Adel Hana)

In Gaza, a Palestinian enclave of two million people controlled by the Islamist terror group Hamas, unemployment stands at 45%, while the poverty rate has risen to 59% from 43% five years ago.

In the West Bank, the unemployment rate is around 17%, the World Bank calculated, saying the “Palestinian Authority’s fiscal situation remains very challenging” and warning it was “no longer able to borrow from domestic banks.”

The World Bank called on donors “to help reduce the budget deficit,” and for the “systematic transfer” of revenues Israel raises from businesses operating in Area C of the West Bank, where Israel holds full control under the 1995 Oslo Accords.

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