'Worst financial crisis'
The Palestinian Authority (PA) government in the West Bank is facing its “worst financial crisis” since its 1994 establishment, the Palestinian labour minister told AFP on Sunday. Ahmed Majdalani warned that
a shortfall in the delivery of aid from Arab donor nations means the PA will be unable to pay employees their July salaries or pay off debts it owes to private businesses across the West Bank.
“It is the worst financial crisis experienced by the Palestinian Authority since its founding,” he told AFP.
“What is available to the Palestinian Authority at the moment in terms of funds is not enough to pay government employee salaries this month, with Ramadan approaching,” he said.“It is not sufficient to pay the bills that the Palestinian Authority owes to private companies.”
The PA has frequently warned it faces a massive financial shortfall that threatens its ability to pay thousands of government employees on time, or even at all.
A delay in salary payments would be particularly sensitive this month, as the Muslim fasting month of Ramadan begins in mid-July. Muslims often break their daily fast at large communal meals, stocking up ahead of time on plenty of food.
Last July, Palestinian prime minister Salam Fayyad said the government would pay workers half-salaries because it faced a shortfall of hundreds of millions of dollars.
He attended a special meeting of the Arab League to urge Arab donor nations to make good on aid pledges.
The executive committee of the Palestine Liberation Organisation also warned on Saturday of the dire funding situation facing the West Bank government.
“The executive committee calls on all the brotherly Arab nations to contribute to the solution of the urgent financial crisis that the national authority faces,” it said.
“The continuation of this crisis will threaten both the Authority’s short and long-term development and the stability of its institutions,” the committee warned.
“The current financial situation is worse than any previous circumstances and requires rapid intervention,” it added.
“The Authority is currently unable, with Ramadan about to start, to pay salaries and other financial entitlements that are both necessary and urgent.”
The PA government headed by Fayyad is expected to meet on Tuesday to discuss the crisis and chart a path forward.
Israel sought a $1 billion IMF bridging loan for the Palestinian Authority earlier this year, but was turned down, an Israeli newspaper said Monday in a report confirmed to AFP by a senior Israeli official.
Haaretz reported that Israel’s central bank chief Stanley Fischer approached the International Monetary Fund for the money after discussing the Palestinian Authority’s financial crisis with Palestinian prime minister Salam Fayyad.
Sometime after the IMF’s annual conference in mid-April, Fischer asked the body for the loan, which Israel would have taken on the Palestinians’ behalf.
Israel would then have transferred the money to the Palestinian Authority (PA) headed by president Mahmoud Abbas, which would have repaid the money to the Israeli government.
Israel would have remained responsible for repaying the loan to the IMF, under the deal, but the institution eventually declined to make the loan available.
Haaretz said it turned the proposal down because it feared setting a precedent of making IMF money available to non-state entities, like the Palestinian Authority, which as a non-state cannot directly request or receive IMF funding.
A senior Israeli official who spoke to AFP on condition of anonymity confirmed that the details contained in the Haaretz report were accurate.
The Palestinian Authority in the West Bank has been suffering a financial crisis for at least the past year, as pledged funds from Arab nations have failed to materialize, leaving the government unable to pay wages and bills.
While Israel has at times contributed to the crisis, Palestinian officials say, by suspending the transfer of tax and tariff revenues it collects on behalf of the PA, it is also eager to avoid the security deterioration that could accompany a financial collapse of the government in the West Bank.
Israeli Prime Minister Binyamin Netanyahu “is interested in preventing a situation whereby the PA collapses financially, which is liable to have a very negative impact on the West Bank security situation,” an Israeli official told Haaretz.