Daily Israel Report

Report: PA Could Collapse Without US Aid

The Palestinian Authority's top monetary official says the risk of a "PA collapse" is very real amid current financial stress.
By Gabe Kahn.
First Publish: 9/20/2011, 8:22 PM

Jihad al-Wazirq
Jihad al-Wazirq
Official PMA Photo

The Palestinian Authority's top monetary official warned Tuesday a cessation of foreign aid from the United States could lead to fiscal ruin and collapse, the PA's semi-official Maan news agency reported.

"It would have a major impact on the economic situation in the West Bank, if the you lose $500 million [in US aid] from financial support for development in the West Bank," Palestinian Monetary Authority Governor Jihad al-Wazir said.

"Really, the risk of a PA collapse is very real under the financial strain, without US assistance, without donor assistance in general," al-Wazir said.

The United States, a major source of financing and aid for the PA, is sharply opposed to its bid for statehood at the United Nations and has promised to use its veto in the Security Council.

Washington has warned of repercussions if President Mahmoud Abbas refuses to back down at the world body, with potential aid cuts and terminating ties being hinted at by both sides.

US lawmakers have said they will pressure the Obama administration to cut American aid to the PA if they refuse to back down.

Al-Wazir said it is unlikely US aid, if cut, would be made up by other donor countries.

"I think it will be highly, very difficult at this stage, because Arab support also hasn't been forthcoming as much as it should have when it comes to budget support," said al-Wazir, who oversees finances in both PA enclaves and Hamas-run Gaza.

"The biggest fear now is that if the Palestinians are turned back empty-handed, what is going to happen to the situation in the West Bank and in particular in Gaza," he said.

Al-Wazir's statements are a stark contrast to claims by PA chairman Mahmoud Abbas and Prime Minister Salaam Fayyad that they are not only ready for statehood, but economically viable.

The PA economy, which had modest growth before suffering a sharp downturn resulting from the Arab Spring, is heavily dependent on Israeli cooperation.

Al-Wazir also admitted Israel could sharply impact PA economic life, which deputy foreign minister Danny Ayalon warned UN donor nations could happen if the PA pursues its bid. 

"Next month it will be a problem [for salaries], probably, unless we get some funding," al-Wazir said.

 The PA pays salaries to 150,000 people in its enclaves in Judea and Samaria, and Hamas-run Gaza, and monthly allowances to another 75,000 people.