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Palestinian Authority Implements Financial Reform - 2004-04-04


The Palestinian Authority has begun implementing a key financial reform of its security forces to try to prevent a hold-up of much-needed foreign aid. Salaries of the police are now being paid directly into bank accounts, replacing the system of bulk cash payments to commanders, which had led to massive fraud and corruption.

For the first time, all of the Palestinian Authority's various security forces are to receive their salaries this month directly into their individual bank accounts.

The reform ends the practice of single large cash payments to the heads of the various security branches. The security chiefs were then responsible for doling out the funds to those under their command.

Authorities said this had led to widespread abuse, with some security chiefs taking a percentage of the salaries of others for themselves, as well as inflating the numbers of their employees to get more money.

In one case, Palestinian officials said, it had been disclosed that a top police commander had been receiving every month the salaries of 7,000 fictitious employees. The same commander allegedly had also paid his actual employees in Israeli shekels at a level considerably lower than the official exchange rate to the U.S. dollar.

The gap meant the commander was receiving the equivalent of an additional $500,000 for himself.

In a bid to end such corruption, international donor countries had demanded an end to the practice of handing over the cash payrolls to the commanders of each of the separate security forces.

The Palestinian president, Yasser Arafat, had consistently blocked reform until this year, when he finally bowed to the pressure of the international community and his cabinet colleagues, in particular the finance minister Salaam Fayyad.

Mr. Fayyad was concerned that without financial reform, the Palestinian Authority would have difficulties in continuing to raise the same high levels of foreign aid it has received in recent years.

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