The World Bank says that international donor support is a must to maintain the Palestinian Authority’s (PA) budget-cutting achievements and stave off crisis, AFP reports.
It said in a report that over the past 10 years the PA had slashed its deficit by an amount equal to 15 percent of its Gross Domestic Product, "an achievement rarely seen in other places around the world".
But "the PA's finances remain fragile with declining budget support leading to a projected financing gap of about $600 million (530 million euros) in 2016," it added.
"In the short term, donor support and in particular budget support is essential to avoid a fiscal crisis leading to wider economic problems," the report said, according to AFP.
The findings are to be presented in New York next week to a meeting of the Ad Hoc Liaison Committee, which coordinates international donor support for the PA.
"The PA's actions will not be enough to fully close the gap, particularly since local borrowing opportunities are now largely exhausted," the report said.
It said that the Palestinian economy would remain hobbled as long as the conflict with Israel continued, "but meaningful steps can avoid further deterioration".
The report made particular mention of Gaza, saying that of $3.5 billion pledged by donors reconstruction following the 2014 war, less than half had so far been disbursed.
"The situation in Gaza is of great concern and the conditions required for post-reconstruction sustainable economic growth are not being put in place," the World Bank director for Judea, Samaria and Gaza, Marina Wes, wrote.
The PA has repeatedly asked for foreign donations in recent years, claiming it is on the verge of collapse due to a worsening financial crisis.
But, while blaming Israel for the PA’s financial woes, its chairman Mahmoud Abbas continues to spend six percent of the PA’s annual budget to pay $4.5 million a month to jailed terrorists and another $6.5 million to their families.
With regard to Gaza, international donors pledged $3.5 billion to rebuild the coastal enclave following the 2014 war.
But funding has been slow, with only around 40 percent of the money delivered, according to Palestinian officials, who cited World Bank figures.
Hamas has warned that the coastal territory could become a breeding ground for extremism unless promised reconstruction is accelerated.