RAMALLAH, Palestinian Territories: The Palestinian Authority
faces a suffocating financial crisis after deep US aid cuts and an
Israeli move to withhold tax transfers, sparking fears for the
stability of the West Bank.
The authority, headed by President Mahmud Abbas, announced a
package of emergency measures on March 10, including halving the
salaries of many civil servants.
The United States has cut more than $500 million in Palestinian aid
in the last year, though only a fraction of that went directly to
The PA has decided to refuse what little US aid remains on offer
for fear of civil suits under new legislation passed by
Israel has also announced it intends to deduct around $10 million a
month in taxes it collects for the PA in a dispute over payments to
the families of prisoners in Israeli jails.
In response, Abbas has refused to receive any funds at all,
labelling the Israeli reductions theft.
That will leave his government with a monthly shortfall of around
$190 million for the length of the crisis.
The money makes up more than 50 percent of the PA’s monthly
revenues, with other funds coming from local taxes and foreign
While the impact of the cuts is still being assessed, analysts
fear it could affect the stability of the occupied West Bank.
“If the economic situation remains so difficult and the PA is
unable to pay salaries and provide services, in addition to
continuing (Israeli) settlement expansion it will lead to an
explosion,” political analyst Jihad Harb said.
Abbas cut off relations with the US administration after President
Donald Trump declared the disputed city of Jerusalem Israel’s
capital in December 2017.
The right-wing Israeli government, strongly backed by the US, has
since sought to squeeze Abbas.
After a deadly anti-Israeli attack last month, Prime Minister
Benjamin Netanyahu said he would withhold $138 million (123 million
euros) in Palestinian revenues over the course of a year.
Israel collects around $190 million a month in customs duties
levied on goods destined for Palestinian markets that transit
through its ports, and then transfers the money to the PA.
Israel said the amount it intended to withhold was equal to what is
paid by the PA to the families of prisoners, or prisoners
themselves, jailed for attacks on Israelis last year.
Many Palestinians view prisoners and those killed while carrying
out attacks as heroes of the fight against Israeli occupation.
Israel says the payments encourage further violence.
Abbas recently accused Netanyahu’s government of causing a
“crippling economic crisis in the Palestinian Authority.”
The PA also said in January it would refuse all further US
government aid for fear of lawsuits under new US legislation
targeting alleged support for “terrorism.”
Finance Minister Shukri Bishara announced earlier this month he
had been forced to “adopt an emergency budget that includes
restricted austerity measures.”
Government employees paid over 2,000 shekels ($555) will receive
only half their salaries until further notice.
Prisoner payments would continue in full, Bishara added.
Nasser Abdel Karim, a Ramallah-based economics professor, told AFP
the PA, and the Palestinian economy more generally, remain totally
controlled by and reliant on Israel.
The PA undertook similar financial measures in 2012 when Israel
withheld taxes over Palestinian efforts to gain international
recognition at the United Nations.
Abdel Karim said such crises are “repeated and disappear
according to the development of the relationship between the
Palestinian Authority and Israel or the countries that support (the
Israel occupied the Gaza Strip and the West Bank, including now
annexed east Jerusalem in the Six-Day War of 1967 and Abbas’s
government has only limited autonomy in West Bank towns and
“The problem is the lack of cash,” economic journalist Jafar
Sadaqa told AFP.
He said that while the PA had faced financial crises before,
“this time is different because it comes as a cumulative result
of political decisions taken by the United States.”
Abbas appointed longtime ally Mohammad Shtayyeh as prime minister
on March 10 to head a new government to oversee the crisis.
Abdel Karim believes the crisis could worsen after an Israeli
general election next month “if a more right-wing Israeli
Netanyahu’s outgoing government is already regarded as the most
right-wing in Israel’s history but on April 9 parties even
further to the right have a realistic chance of winning seats in
parliament for the first time.
Israeli-Palestinian peace efforts have been at a standstill since
2014, when a drive for a deal by the administration of President
Barack Obama collapsed in the face of persistent Israeli settlement
expansion in the West Bank.
Israeli soldiers kill unarmed Palestinian in West Bank
Source: FS – All-News-Economy
Palestinians in financial crisis after Israel, US moves