Daily Israel Report

PA Facing 'Worst Financial Crisis' Ever, Says Minister

The Palestinian Authority government is facing its “worst financial crisis” since its establishment, its labor minister says.
By Elad Benari
First Publish: 7/2/2012, 5:44 AM

Money (illustration)
Money (illustration)
Flash 90

The Palestinian Authority government is facing its “worst financial crisis” since its 1994 establishment, the PA’s labor minister told AFP on Sunday.

Ahmed Majdalani warned in a conversation with the French news agency 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.

“It is the worst financial crisis experienced by the Palestinian Authority since its founding,” Majdalani told AFP, adding, “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.”

“It is not sufficient to pay the bills that the Palestinian Authority owes to private companies,” he claimed.

AFP noted that 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.

The PA Prime Minister, Salam Fayyad, warned a few months ago that his government would reduce expenses if donor countries fail to pay aid they pledged to the PA.

Fayyad reiterated that the PA would face a serious financial situation if funding does not arrive as promised. He added that the PA has been suffering an acute financial crisis for more than two years.

Last July, 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.

A recent World Bank report said the PA is undergoing a financial crisis and also admitted that it was primarily due to the lack of donor countries fulfilling their pledges to fork over billions of dollars to Ramallah.

Fayyad warned several months ago that the Palestinian Authority may soon fail financially and cease to exist, but he blamed that on Israel’s freeze of the transfer of tax revenues it collects for the PA.

Israel, which transfers some $100 million in tax payments to the PA every month, decided to halt the transfer of taxes to the PA as part of a round of sanctions against the entity, following its ascension as a 'full-member state' to UNESCO.

Israel’s Security Cabinet later approved the unfreezing of the tax revenues.

Meanwhile, the executive committee of the Palestine Liberation Organization also warned on Saturday of the dire funding situation facing the 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, according to AFP.

“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.”

Fayyad’s government is expected to meet on Tuesday to discuss the crisis and chart a path forward, the report said.