The World Bank is accusing Israel of stifling the Palestinian economy. As Robert Berger reports from VOA's Jerusalem bureau, Palestinian economic development has clashed with Israeli security considerations.

Palestinian Abu Mohammed, 75, pushes his cart as he sells eggs next to a section of Israel's separation barrier in the West Bank town of Aram, just outside Jerusalem, 27 Apr 2008

A report by the World Bank says the Palestinian economy will not grow this year, despite billions of dollars in international aid. The bank blamed the problem on Israeli restrictions on Palestinian movement and trade.

The report said the economy in the Gaza Strip contracted last year because of a crippling Israeli blockade and there was only modest growth in the West Bank because of a network of Israeli roadblocks.

"If you will give a Palestinian even $1 billion, without being able to move to sell his merchandise, to bring in some merchandise, all of this cash will go for nothing," said Palestinian analyst Wadia Abu Nasser.

U.S. Secretary of State Condoleezza Rice has been pushing Israel to ease restrictions to boost the Palestinian economy and in turn, increase support for the peace process. While Israel has removed one major checkpoint and about 50 dirt roadblocks, it has left most of the restrictions in place.

Israeli spokesman Mark Regev says Israel understands the importance of freedom of movement.

"We want to move and when our Palestinian partner is ready to take security responsibility, we will be ready to move, taking down roadblocks and so forth," said Regev. 

At the same time, Regev warned that Palestinian militants could exploit the removal of roadblocks to carry out suicide bombings, and that would harm the peace process.

"An irresponsible Israeli movement on this issue would just destroy the process because the vacuum created and exploited by the extremists could well kill the positive momentum we now have, so it is very important that on this issue we move cautiously," he added.

In December, international donors pledged more than $7 billion to beef up the Palestinian Authority and economy. The aim was to gradually cut government spending and revive the private sector, eventually making the Palestinians less dependent on foreign aid. But the World Bank warns that unless Israel changes its policies, this goal cannot be achieved.