Palestinian Authority struggles to pay public employees | News from the occupied West Bank

Ramallah, Occupied West Bank – After years of economic stagnation, authorities in the occupied West Bank say they are struggling to pay the salaries of public employees as soaring inflation, dwindling donor aid and Israel’s restraint vital tax revenues are strangling the already crippled Palestinian Authority (PA) budget.

“The conditions in which we live are difficult, we are in financial deficit,” Prime Minister Mohammad Shtayyeh admitted this week, telling reporters that the Palestinian Authority had not received assistance to pay salaries, estimated at a monthly cost of 920 million Israeli shekels ($ 292 million). ).

The financial crisis – describe by officials and analysts as “the worst” since the establishment of the Palestinian Authority in 1993 – left workers anxious.

“At first we heard that we would not be paid at all. Then we were told that we could get a permanent deduction of 25 percent from our wages. After that, they said the 25 percent deduction would only be valid for a few months, ”a PA public employee told Al Jazeera on condition of anonymity.

“Until now, no one knows whether or not we will get paid, or whether we will receive our full wages or only 75 percent.”

Like economies around the world, Palestine is currently grappling with soaring inflation resulting from supply chain grunts and raw material shortages as nations reject restrictions on coronaviruses.

PA tax revenues decreases to their lowest levels in 20 years shortly after the start of the pandemic, which has only exacerbated long-standing financial challenges.

As foreign donor support has waned over the years, the biggest blow came in 2017, when former US President Donald Trump halted virtually all US aid. to the Palestinians. Although Trump’s successor Joe Biden has reopened some of the funding taps, US laws now prohibit direct aid to the Palestinian Authority.

In November, Shtayyeh’s aid planning and coordination adviser Estephan Salameh told local media that the crisis could last six months before the expected EU aid amounting to 600 million euros ($ 680 million) does arrive in March.

A World Bank report from November 17 (PDF) said the PA deficit is expected to reach $ 1.69 billion by the end of the year, while donor aid is expected to “rise to $ 184 million, or 38 percent of what was received in 2020 ”.

“The efforts of all parties are essential to avert a crisis because without additional funding the Palestinian Authority could face difficulties in meeting its recurring commitments towards the end of the year,” the report warned.

In September, Israel said it had loaned 500 million shekels to the Palestinian Authority ($ 155 million) to be repaid by June 2022 in order to “prevent its collapse,” according to Israeli media.

Old solutions are not an option

Jaafar Sadaqa, a Ramallah-based economic analyst, said there was serious uncertainty over whether a long-term solution would be found.

In previous financial crises, Sadaqa said, donor countries “would rush to pay the required amounts and often even increase their financial assistance to the Palestinian Authority.”

Things are different now, however.

In October, before embarking on a European tour in an attempt to mobilize political and financial support, Shtayyeh told a special PA session that foreign aid had fallen by 90% this year. The decline in international aid left the Palestinian Authority with a funding gap of $ 704 million in the first eight months of 2021, according to the World Bank, with its core budget funding at 10 percent of that. that it was last year.

And this time around, observers say the Palestinian Authority may not be able to find its way either.

“In the past, the Palestinian Authority also used loans from banks and returned them after the crisis ended. However, banks are currently unwilling to lend to the PA as it has no collateral, ”Sadaqa said.

The PA’s debt to local banks stood at $ 2.5 billion in August 2021. National bank loans, meanwhile, are already exceeding the limit set by the Palestinian Monetary Authority (PMA), “eliminating this financing option in the future, ”according to the World Bank.

At this week’s press conference, Shtayyeh also warned that the Palestinian Authority “may not be able to borrow from banks” this month. “We hope in the coming days to meet our needs,” he added.

Israel adds to PA woes

Added to the Palestinian Authority’s woes are sharp cuts in tax revenues – another pillar of its budget – due to Israel’s systematic refusal to hand over part of so-called “customs clearance revenues.”

The funds – taxes collected by Israel on behalf of the Palestinian Authority, including customs duties – represent more than 60 percent annual income of the PA.

Under the 1994 economic agreement between Israel and the Palestinian Authority known as the Paris Protocol, these funds are intended to be transferred to the Palestinian Authority on a monthly basis. But Israel has often turned those funds into political bargaining chips, refusing to hand over the money in whole or in part until the Palestinian Authority bends to its will.

In January and June 2021, Israel deducted 50 million shekels ($ 16 million) per month from mine clearance funds, citing the Palestinian Authority’s cash allocations for the families of Palestinian prisoners and those killed by Israel. . In July, Israel increased the monthly deductions to 100 million shekels ($ 32 million).

“These monthly deductions represent a significant pressure on the Palestinian fiscal situation,” said the World Bank.

Beyond the financial militarization of tax revenues, the Palestinian Authority also faces a myriad of tax leaks and structural problems caused by the Israeli occupation.

The United Nations Conference on Trade and Development (UNCTAD) said in a report (PDF)last week since the second Palestinian intifada or the uprising of 2000, the occupation cost the Palestinian economy in the West Bank some $ 57.7 billion in closures, restrictions and military operations.

“Israel imposed a complex system of mobility restrictions, which effectively turned the West Bank into isolated islands. These measures crippled economic activity, inflicted severe upheavals and significant income losses and thus exacerbated pre-existing and deep structural weaknesses and vulnerabilities, ”the report said.

“They have had lasting effects, including volatile economic growth, persistently high unemployment and poverty rates, and chronic internal and external deficits. “

The Israeli occupation effectively isolates Palestinians from international markets, making them heavily dependent on Israel for trade. Last year Israel accounted for 80 percent of Palestinian exports and 58 percent of imports, according to UN figures.

In terms of US dollars, Palestinian imports from Israel last year were worth $ 2.77 billion and exports less than $ 1 billion, according to the US Department of Commerce.

‘It’s not enough’

As the Palestinian Authority tries to emerge from the fiscal crisis, low-income public sector workers are struggling to keep food on the table.

A Palestinian Authority official, who also spoke to Al Jazeera on condition of anonymity, said soaring food prices made it increasingly difficult for her to feed her family of eight with her income. fixed – which has not been adjusted for inflation.

The sole breadwinner, the official said she could afford to buy five chickens a week to support her family. Now she can only afford three. And the prices of other basic commodities, such as sugar, rice and flour, are also increasing.

“After the sharp price increase, there is now an additional expense that was neither planned nor accounted for, which added an additional burden to our family,” she said.

Ibrahim al-Qady, the head of the Consumer Protection Agency affiliated with the Palestinian Authority’s Ministry of Economics, told Al Jazeera that there had been alarms surrounding the issue of price hikes.

“Palestine has been affected by this price increase like any other country in the world,” he said, adding that his agency had stepped up its surveillance of the markets to ensure that there was no be no price increase.

But for those struggling with the burden of income stagnation and rising prices, the future looks bleak.

“We are afraid that prices will continue to rise,” Moudjahid al-Assa, owner of a clothing store in Bethlehem, told Al Jazeera.

The 32-year-old said he had cut back on his sugar purchases, but feared inflation would only get worse, making life more difficult for his small family because his income was not ” more than enough to cover the expenses and needs of the house for a whole month “.

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