Billions of dollars in international economic aid will be needed to reverse decades of border closures, military operations and de-development in Gaza, according to a report published Wednesday by the United Nations Conference on Trade and Development, UNCTAD.
“While lifting all restrictions is a necessary condition for sustainable recovery, it is by no means sufficient,” the report said.
“Donors and the international community need to extend significant economic aid to repair the extensive damage Gaza has experienced under prolonged restrictions and closures and frequent military operations, which has stifled the economy and decimated infrastructure,” it said.
The report documents economic conditions in the Occupied Palestinian Territories through the end of 2022, prior to the current chain of disastrous events triggered by the October 7 assault on Israel by Hamas militants.
“The economic consequences of the current and ongoing humanitarian crisis in Gaza are important to determine,” said Richard Kozul-Wright, UNCTAD director, division on globalization and development strategies.
He said it was incredibly difficult to assess the damage.
“It is buildings. It is hospitals. It is very difficult to make a proper assessment until the fighting stops but it has got to be in the billions of dollars … in the tens of billions of dollars,” said Kozul-Wright. “What I think the report emphasizes is the worrying trend in aid to the Palestinian economy, plus its inability to generate its own fiscal revenues in an independent way.”
The report says Israel’s decades-long blockade of Gaza has hollowed out its economy, leaving 80% of the population dependent on international aid. It also says nearly half of Gaza’s population is unemployed and that real GDP per capita is close to its lowest level since 1994.
Authors of the report note that since three-quarters of Palestinian trade is with Israel and the Israeli shekel is the main currency in circulation, Israel has a lot of control over the Palestinian Authorities' fiscal policy.
“Israel collects Palestinian trade taxes because all Palestinian import and export goes through Israel or through Israeli controlled borders,” said Mutasim Elagraa, coordinator of UNCTAD assistance to the Palestinian people.
“Israel effectively controls two-thirds of Palestinian tax revenue and transfers it to the Palestinian government,” he said noting that Israel sometimes delays the transfer or even freezes the transfer, which “makes Palestinians fiscally vulnerable.”
On October 21, Israel partially lifted its siege of Gaza, allowing several convoys of food, water, and medical supplies to enter the territory. However, the Israeli government has refused to allow fuel into the Gaza Strip, claiming that Hamas has fuel that it is hoarding for use in military operations.
“Lack of fuel will have a profound impact on the humanitarian support that the U.N. is currently providing and is an essential lifeline of many of the inhabitants of Gaza,” said Kozul-Wright. “So, I think the impact will be immediate on the ground, but it will be difficult to know what its longer-term impact will be on the Gazan economy.”
In its concluding remarks, the UNCTAD report recommends that the “vicious circle of destruction and partial reconstruction [of Gaza] needs to be broken by negotiating a peaceful solution, based on international law, and relevant United Nations and Security Council resolutions, to end hostilities.”
While increasing donor support will be important for the recovery of Gaza’s economy, the report notes that this “should not be viewed as a substitute for ending restrictions and closures” and calls on Israel and all parties “to bear their responsibilities under international law.”