Carnegie Endowment for International Peace / June 9, 2020
Palestinians in the West Bank and Gaza will be facing severe economic challenges for the foreseeable future, irrespective of the pandemic.
With deep reductions in international aid and an almost complete cut in U.S. funding to Palestinians since 2018, the West Bank economy has been in a free fall. In Gaza, Palestinians also face the almost insurmountable challenge of trying to subsist while under Israeli blockade. And now, as a result of the coronavirus, the Palestinian Central Bureau of Statistics estimates that from March to May 2020 the Palestinian Authority (PA) will lose $2.5 billion with a GDP contraction of 14 percent. The prime minister reported an increase in the budget deficit to $1.4 billion.
Financial support from Gulf Arab states, particularly from Saudi Arabia and Qatar, has been a lifeline to the occupied Palestinian territories through difficult times. With oil futures at one point going below zero, however, Gulf aid is in serious jeopardy with potentially devastating impacts on Palestinians who, like everyone else but with the added challenge of military occupation, will be attempting to dig out from the economic fallout of the pandemic.
Palestinians can ill-afford a loss of aid from the Gulf, which is why the Palestinian Authority (PA) was quick to smooth over tensions with Saudi Arabia following a Palestinian caricaturist’s critique of the Arab role in the plunging oil prices.
Before the coronavirus, Saudi budgetary support to the PA was keeping public sector employees paid, allowing for some semblance of governance in those parts of the West Bank under the PA’s limited control. The kingdom is the PA’s biggest funder, providing $20 million per month since 2013. Saudi money also facilitates low-key Palestinian housing and development in East Jerusalem and allows for the continued operations of the UN Relief and Works Agency (UNRWA), the UN body providing essential services to Palestinian refugees in the region. With U.S. withdrawal of funding impacting one-third of the UNRWA’s total budget, Saudi Arabia became the agency’s third-largest donor, providing $160 million in support in 2018. According to the Saudi ambassador to the UN, over a period of two decades, the kingdom has provided Palestinians with $6 billion in humanitarian relief and development assistance and an additional $1 billion for Palestinian refugees.
On occasion, Saudi aid has been delayed as a way to express displeasure with the PA, including when Crown Prince Mohammad bin Salman flirted with the idea of openly backing the 2020 U.S. peace proposal between Israel and Palestine. Money from the kingdom resumed, however, when King Salman took back the Palestine file, although the flow is once again shut off with falling oil prices. The nose dive in oil prices will also impact remittances from Palestinian workers, which account for approximately 16 percent of Palestine’s GDP and are likely to fall by about 20 percent due to the pandemic.
Qatari largesse is primarily directed at Hamas-controlled Gaza. This aid flow is continuing despite the pandemic—at least for now. In March, Qatar announced that it would deliver $150 million over six months to the enclave. In contrast, in fiscal year 2019, Qatar provided $170.3 million in budgetary support to the PA. Qatari aid is responsible for housing construction, infrastructure, and subsistence in Gaza.
The UAE does not provide financial assistance to the PA and is even more unlikely to do so in the future as the relationship has soured over a number of years. When aid has been extended to Palestinians, it has generally gone toward humanitarian relief or reconstruction in Gaza, arguably as a way to bolster the Palestinian President’s arch-enemy, ousted Fatah-strongman Mohammad Dahlan, who hails from Gaza and whom the UAE hosts. In fact, a recent UAE air transport of medical supplies for the PA to combat the coronavirus—which was not coordinated with Palestinian officials and which landed in Tel Aviv—was rejected by Palestinian leader Mahmoud Abbas because it was seen as an underhanded attempt at normalizing ties with Israel. The supplies were then redirected to Hamas in Gaza, where virus cases have recently spiked.
All told, Palestinians in the West Bank and Gaza will be facing severe economic challenges for the foreseeable future, irrespective of the pandemic.
Zaha Hassan is a human rights lawyer and visiting fellow at the Carnegie Endowment for International Peace