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September 24, 2012

Donors Urge Israel to Help Alleviate Palestinian Fiscal Crisis

by Margaret Besheer

Donor countries to the Palestinian Authority met Sunday on the sidelines of the U.N. General Assembly and urged Israel to lift some of its restrictions on economic activity in Palestinian areas in a bid to help alleviate a growing Palestinian financial crisis.

Norwegian Foreign Minister Espen Barth Eide said donor countries are worried about a dire and worsening economic situation in the Palestinian territories, particularly in Area C -- the territory covering 60 percent of the West Bank, where Israel maintains full control under the 1993 Oslo Accords.

“The encouragement to Israel is to continue to lift restrictions on economic activity, and the current state of affairs makes it more difficult for the Palestinian economy to grow at the pace that we saw a few years ago," said Eide. "That also confirms this main message that institution building has been a success, but economic development is held back by activities in Area C.”

Last week, the World Bank and the International Monetary Fund issued a report that says the Palestinian financial crisis will continue to worsen unless foreign funding increases and Israel eases restrictions on economic activity.  The two agencies say the Palestinian Authority faces a shortfall of about $400 million this year.

Palestinian Finance Minister Nabil Kassis told reporters Sunday that donor countries have some $300 million in promised pledges still unpaid.  He warned that a two-state solution - Israel and an independent Palestinian state living peacefully side-by-side -- could be at risk if the Palestinian Authority fiscal situation continues to deteriorate.

“The two-state solution is in jeopardy if the P&A is not able to continue to function and to prepare for the two-state solution,” said Kassis.

The Palestinian Authority has implemented austerity measures that have been met with anger by a frustrated public facing rising fuel and food prices and staggering unemployment.

Finance Minister Kassis would not say how long the Palestinian Authority could continue to operate without additional funds.

Israel’s deputy director-general for economic affairs, Irit Ben-Abba, said her government is very concerned about the situation and that it has taken steps to alleviate it, including releasing about $60 million to the Palestinian Authority last week.  The money is an advance payment of tax revenues.  She said Israel has also arranged for the transfer of goods and allowed projects to be implemented in Area C that will generate more income for the Palestinians.