January 7, 2013
If allowed to continue, the Palestinian Authority’s unprecedented financial crisis will quickly double the number of Palestinian poor to 50 percent of a population of roughly 4 million, Fayyad told AP.
Fayyad said the malaise is further boosting the political appeal of the Islamic militant Hamas while discrediting him and other proponents of a nonviolent path to statehood in the West Bank, Gaza Strip and east Jerusalem. Hamas seized Gaza from Fayyad’s boss, Palestinian President Mahmoud Abbas, in a 2007 takeover, leaving Abbas with only the West Bank.
The failure of the West Bank-based Palestinian Authority to deliver on many of its promises, coupled with recent Israeli concessions to Hamas, “has produced a reality of a doctrinal win for what Hamas stands for, and correspondingly a doctrinal defeat for the Palestinian Authority,” Fayyad said.
The Palestinian Authority was established nearly two decades ago, as part of interim peace deals with Israel, and was meant to make way after five years for a Palestinian state alongside Israel. However, Israeli-Palestinian negotiations repeatedly broke down, at times amid bursts of violence, and failed to produce a final deal.
After the outbreak of the second Palestinian uprising in 2000, which resulted in harsh Israeli restrictions on Palestinian trade and movement, the Palestinian Authority became heavily dependent on foreign aid. It has received hundreds of millions of dollars each year since then, but has struggled to wean itself off foreign support.
Fayyad said his budget deficit has widened in recent years, blaming Arab states that broke aid promises.
“The financing problem that we’ve had in the last few years is solely due to some Arab donors not fulfilling their pledge of support in accordance with Arab League resolutions,” Fayyad said. European countries kept all their aid commitments and the U.S. honored most, with the exception of $200 million held up by Congress last year, he added.
The crisis worsened sharply after the UN General Assembly voted overwhelmingly in late November, at the request of Abbas, to recognize a state of Palestine in the West Bank, Gaza and east Jerusalem, the territories Israel captured in 1967. Israel objected to the UN upgrade, accusing Abbas of trying to bypass negotiations.
Starting in December, Israel halted the monthly transfers of about $100 million in tax rebates it collects on behalf of the Palestinians. That sum amounts to about one-third of the monthly operating costs of the Palestinian Authority. Fayyad said he now only takes in about $50 million a month in revenues.
On Sunday, Abbas declared that his Palestinian Authority would be known as the State of Palestine from now on, in keeping with UN recognition of Palestine as a non-member observer state in November.
Fayyad’s heftiest monthly budget item is the government payroll. The Palestinian Authority employs some 150,000 people, including civil servants and members of the security forces. About 60,000 live in Gaza and served under Abbas before the Hamas takeover, but they continue to draw salaries even though they’ve since been replaced by Hamas loyalists.
In recent months, the government has paid salaries in installments.
Fayyad said he managed to pay half the November salaries by getting another bank loan, using as collateral a promise by the Arab League to cover whatever money Israel might withhold in retaliation for the UN bid. The money from the Arab states never came, and Fayyad said he can’t pay the rest of the November salaries, let alone December wages.
The Palestinian Authority already owes local banks more than $1.3 billion and can’t get more loans. It also owes hundreds of millions of dollars to private suppliers, and some have stopped doing business with the government.
Fayyad said his government is on “the verge of being completely incapacitated.” About 1 million Palestinians who depend on government salaries “are at a very serious threat of being pushed into a circle of poverty,” he said. This would double the poverty rate, which currently stands at 25 percent in the West Bank and Gaza, he said.
Fayyad said these dire consequences would happen in “short order,” but he would not give specifics.
The deputy chairman of the 22-nation Arab League, Mohammed Sbeih, acknowledged Sunday that the Palestinian Authority is in a “critical situation.” He said the head of the league has written to member states urging them “to pay the pledged $100 million.”
The growing hardships have sparked repeated protests in the West Bank. Civil servants have held several warning strikes. On Sunday, the union decided to step up protests, calling for four days of strikes over the next two weeks.