PA financial crisis close to breaking point, warns UN official

Middle East Monitor  /  October 20, 2021

The Palestinian Authority is suffering from a financial crisis which is close to a “breaking point”, the UN Special Coordinator for the Middle East Peace Process has warned.

“Donor support, including direct budget support, continues its multi-year decline. Estimates suggest that the PA will have a 2021 budget deficit of around $800 million. This would nearly double the 2020 gap,” Tor Wennesland told the UN Security Council yesterday. “The PA’s borrowing capacity with the banks has been exhausted.”

The UN official drew the council’s attention to the financial situation that the UN Relief and Works Agency for Palestine Refugees (UNRWA) finds itself in. Although the agency is “indispensable for regional stability”, Wennesland said that it “must have the necessary resources to fulfil its mandate”. Instead, it has an ongoing budget shortfall.

UNRWA depends almost entirely on voluntary donations from UN member states. However, in 2018, the Trump administration cut aid to UNRWA and the PA. Donald Trump’s successor as US President, Joe Biden, restored aid to the tune of $200 million to the Palestinians when he took office earlier this year.

The PA’s income has also been hit by Israel deducting some of the tax revenues it collects on behalf of the authority, which it says was used to pay stipends to the families of martyrs and prisoners who “committed terror attacks” against the occupation. This, said Wennesland, adds to the PA’s financial woes.

The UN Special Coordinator then took the opportunity in front of the Security Council to raise concerns regarding Israel’s E1 project, which includes the construction of thousands of illegal settlement units on large areas of Palestinian territory for the purpose of linking the Ma’ale Adumim settlement bloc to occupied Jerusalem. “This will sever the connection between the northern and southern West Bank, significantly undermining the chances for establishing a viable and contiguous Palestinian state as part of a negotiated two-state solution,” he pointed out.

The UN official reminded the council that all settlements are illegal under international law and “remain a substantial obstacle to peace.” Nevertheless, around 650,000 Israelis live in 164 settlements and 124 outposts scattered across the occupied West Bank and Jerusalem.