‘Precarious’ Palestinian economy needs more aid, says World Bank

Palestinians shop at a market in the West Bank city of Ramallah (AFP)

MEE Staff

Middle East Eye  /  May 9, 2022

Palestinian Authority in ‘destabilizing budget crisis’ despite territory posting 7.8 percent growth in 2021.

The World Bank has urged the international community to boost support for the Palestinian Authority, which it said is facing a destabilizing budget crisis linked partly to “record low” foreign aid contributions. 

In a report published on Monday, the World Bank painted a contrasting view of the Palestinian economy, which is seeing a post-lockdown recovery even as food insecurity worsens in places.

It said the economy of the besieged Gaza Strip witnessed 3.4 percent growth in 2021 despite Israel’s brutal 11-day offensive last May.

Israel’s military operation last year killed 256 Palestinians, including 66 children, according to the UN. In Israel, 13 people were killed by rockets launched from Gaza.

Meanwhile, the economy of the occupied West Bank witnessed a 7.8 percent growth in 2021, which was partly fueled by an increased number of Israeli work permits enabling Palestinians to find jobs in Israel.

The growth in the West Bank allowed the Palestinian Authority (PA) to increase its tax revenue but the financial outlook remains “precarious”, the World Bank said.

“The fiscal situation remains highly challenging,” the organization said, adding that the PA was now paying only “partial salaries since November”.

Since it was established in 1993, the PA has relied heavily on foreign aid to pay its employees’ salaries and pump cash into the economy.

However, in recent years, the USUK, and EU had been using these donations to push the PA for political compromise.

The PA’s 2021 budget deficit hit $1.26bn, while a “record low” $317m was received in foreign aid, the World Bank said.

Palestinian prime minister Mohammed Shtayyeh was set to meet EU officials in Brussels to push for “progress in the European position in terms of supporting the PA”, the authority’s spokesman Ibrahim Melhem told the AFP news agency.

Israel’s regional cooperation minister Issawi Freij is also expected at the Brussels conference which is set to begin on Tuesday.

Israeli Prime Minister Naftali Bennett, who opposes Palestinian statehood, has said he wants to boost economic opportunities in the West Bank.

He has argued that Palestinians earning high Israeli wages along with other economic opportunities could help reduce violence in the long-running conflict.

On Friday, Israel announced plans to build thousands of housing units for illegal Jewish settlements in the occupied West Bank despite the decision being met with US criticism.

The PA also condemned the decision, calling it “a flagrant violation” that will inflame tension and undermine trust as well as the two-state solution.”

The last time settlement units were approved in October, the Biden administration released a similar statement, condemning continued settlement building publicly.