Palestinian Authority on the brink of financial collapse as fewer donors meet their commitments

The Palestinian Authority is experiencing the worst fiscal difficulties it has had since its inception more than a quarter of a century ago. Senior officials say the Treasury is facing a severe liquidity crisis, and this could soon be reflected in its ability to pay government salaries and run its day-to-day business activities.

An adviser to the Palestinian Authority Prime Minister, Mohammad Shtayyeh, told a local radio station that the Palestinian Authority is experiencing its worst financial situation in years.

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Arab League Ministers Meeting in Cairo

Arab league

(Photo: Reuters)

In an interview on Ajyal Radio this week, Stephen Salameh said that the cessation of European support adds to a massive reduction in financial aid from Arab countries and the United States. In the past, when faced with financial crises, the Palestinian Authority turned to wealthy Arab governments in the Gulf for help, but that support has waned.

Of the $ 100 million that Arab League member countries had pledged to the Palestinian Authority as part of a financial “safety net,” less than $ 2 million has been received, according to a senior official in the Authority’s Finance Ministry. Palestine.

Donor share in the PA budget has dropped by a whopping 58% in recent years, forcing the government to look for ways to make up the difference. This has left the Palestinian Authority with limited options; he raised taxes, implemented austerity measures, and sought loans from local banks.

But with the emergence of the coronavirus and an economy on the ropes, citizens cannot afford to pay higher taxes and banks are increasingly wary of further increasing the Palestinian Authority’s borrowing limit. The government is now trying to resurrect old moves from its playbook.

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Illustration: The Media LineIllustration: The Media Line


(Photo: The Media Line)

President Mahmoud Abbas sent Shtayyeh to Brussels this week to persuade Europeans to restore financial aid. The Palestinian Authority government has received no help from the European Union this year.

An example of the seriousness of the financial situation: Gas stations in the West Bank city of Bethlehem have refused to serve Palestinian Authority cars, including security vehicles, because the government has not paid their bills.

Nizar al-Jabari, a member of the Board of Directors of the Gas Station Owners Union, said on Wednesday that the Palestinian Authority Finance Ministry paid 3 million shekels, or $ 940,000, to the gas stations the day before.

Jabari estimates the government’s debt to gas stations at “between NIS 50 million and NIS 60 million,” or $ 16 million to $ 19 million. The problems are serious enough to threaten the very existence of the authority.

On the political front, Abbas faces growing challenges within his own Fatah party and popular unrest due to his crackdown on civil liberties and the cancellation of the presidential and parliamentary elections scheduled for the summer. And the lack of progress on the path of negotiations with Israel has had a major impact on the position of the Palestinian Authority at the local, regional and international levels.

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President Mahmoud Abbas gestures during a meeting with the Palestinian leadershipPresident Mahmoud Abbas gestures during a meeting with the Palestinian leadership

Palestinian President Mahmoud Abbas

(Photo: EPA)

The Palestinian street is growing impatient with the Palestinian Authority government. “Prices are going up, incomes are stagnant or there is no work,” said Ameen Khairi, a shop owner in Nablus, in the northern West Bank. “They overloaded us with taxes that we cannot pay. The Palestinian Authority needs to live within its means. “

The economy of the Palestinian territories teeters on the brink of collapse and the internal division is deepening. “The Palestinian economy continues to suffer under occupation. Now combine that with the mismanagement of the coronavirus policy that added to the problems, ”says Jamal Nimer, Chairman of the Board of Directors of the Carmel Hotel in Ramallah.

He said that the Palestinian economy is failing, especially the tourism sector, which has been hit hard by closures and restrictions as part of the government’s policy to contain the COVID-19 pandemic.

“Our economy is struggling, unemployment is skyrocketing and poverty levels are skyrocketing. The outlook for the Palestinian economy is bleak, “said Nimer. More than a quarter of Palestinians lived in poverty before the pandemic.

Dr. Nasr Abdel Karim, professor of finance and economics at the Arab American University School of Graduate Studies in Ramallah, says there is no doubt that the Palestinian Authority is experiencing a “real and suffocating financial crisis. Its manifestations are obvious. There is a budget deficit, an accumulation of debt and delays in paying your obligations. It is undeniable that there is a clear decrease in aid. “

Abdel Karim said, however, that this crisis “is not new and has been repeated for years.” But he argues that what makes the current financial difficulties different is “essentially the position of the European Union. European aid, which was between $ 400 million and $ 500 million (annually), is not present now ”.

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Mahmoud AbbasMahmoud Abbas

Mahmoud Abbas

(Photo: EPA)

Last week, one of the Palestinian Authority’s biggest European backers criticized the Palestinian government for its widespread corruption. A Swedish radio station quoted Foreign Minister Ann Linde as saying: “The corruption in Palestine is an obstacle to providing financial support.”

83% of Palestinians believe there is corruption in the institutions of the Palestinian Authority, according to a recent survey by the Ramallah-based Palestinian Center for Policy Research and Polls (PCPSR).

Abdel Karim adds that Palestinians had high expectations after the election of US President Joe Biden and the change of administration that the flow of US aid would resume soon after the Trump White House cut it off.

“This is not happening yet, leaving the Palestinian Authority disappointed with the US administration,” he said. One of Abbas’s advisers confirmed to The Media Line that the president and his inner circle are “concerned” about the financial and political state of the Palestinian Authority.

“There is a feeling in the Mukataa that everyone has abandoned us,” he said, referring to the presidential compound in Ramallah, the seat of government for the Palestinian Authority.

According to the London-based pan-Arab newspaper Al-Araby Al-Jadeed, during a meeting with Palestinian leaders in Ramallah last week, Abbas became enraged at the Biden administration and described US officials as “liars for not keeping promises. what did you do”. made for us. “

Those promises include reopening the Palestine Liberation Organization office in Washington, providing financial support to the Palestinian Authority, and reopening the US consulate in East Jerusalem.

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US Vice President Joe Biden (right) and Palestinian President Mahmoud Abbas speak during a meeting at the presidential compound in the West Bank city of Ramallah.US Vice President Joe Biden (right) and Palestinian President Mahmoud Abbas speak during a meeting at the presidential compound in the West Bank city of Ramallah.

US President Joe Biden and Palestinian President Mahmoud Abbas

(Photo: AFP)

The Palestinians had renewed support from the United States, politically and financially, which would encourage rich Arab states to restore their financial support. However, according to the same unidentified source, there is “a clear American truancy on the direct return of financial support to the Palestinian Authority, especially since the United States accuses the Palestinian Authority of corruption.”

“This has affected the Gulf’s response to requests from the Palestinian Authority,” the source said. Abdul Karim says that the Palestinian Authority leadership is living in a “political and financial bubble”, and that this week’s visit by the head of the Palestinian General Intelligence Service, Majid Faraj, to Dubai, although it is under the pretext of a visit to Palestine. pavilion at Expo 2020, “is an attempt to placate the UAE and reestablish ties.”

Faraj, one of Abbas’s closest and most trusted confidants, met with the ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, amid intense coverage by the official Palestinian media. It was the first time that Mohammed bin Rashid met with a senior Palestinian official since relations between the Palestinian Authority and the United Arab Emirates became strained.

“The Palestinian Authority is also concerned about the diplomatic crisis because if conditions improve diplomatically, it will have positive repercussions for financial aid,” said Abdul Karim.

The article was written by Mohammad Al-Kassim and reprinted with permission from The media line.

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