Thursday, October 22, 2020

Financial crisis looms above Palestinians

By J.J. Rhies - March 29, 2019
Section: [Main News]
Tags: [financial crisis]

The Palestinian Authority (PA) is confronting a potential financial crisis after the US and Israel withdrew billions in assistance over the past seven months.

This month, Israel cut five per cent of its monthly financial assistance to the PA, which came from import tax revenues.

Israel said the cut signified its discontent with the PA’s policy of paying families of Palestinian prisoners in Israeli jails, prisoners which it has claimed are militants.

Israel is withholding a sum equal to the grand monthly total that the PA pays to families.

In response to the cut, the PA rejected all of the tax money Israel collects for it - which in January was almost 700 million shekels or roughly half of the PA’s monthly budget.

The unexpected cut forced the PA to implement an emergency budget, which included halving the salaries of all civil servants who earn more than 2,000 shekels a month.

Jihad Harb, an Israeli researcher and political analyst, told AFP the deficit could beget serious consequences.

“If the economic situation remains so difficult and the PA is unable to pay salaries and provide services, in addition to continuing [Israeli] settlement expansion[,] it will lead to an explosion,” Harb said.  

But the Palestinian government is undeterred by the Israeli tax cut and will continue to pay the families of the jailed prisoners.

“No force on earth can alter that,” Finance Minister Shukri Bishara said.

Prior US cuts and legislation devastate PA and Palestinians

The Anti-Terrorism Clarification Act (ATCA), a United States law that took effect February 1, prompted the PA last winter to refuse all forthcoming US aid.

The law extends US jurisdiction over any foreign entity that receives US financial aid, allowing it to prosecute any such entity that may have aided or abetted a terrorist act that harmed Americans.

Questions remain about the extent to which the ATCA could indirectly affect West Bank security enforcement, now that the PA has refused all future US aid.

In January, then-IDF Chief of Staff Gadi Eisenkot said that PA forces help keep the West Bank safe and they were instrumental in stopping a recent Hamas plot in the occupied territory.


After the ACTA took effect, some US officials recognized it might affect funding to the PA - including to security forces - and tried to amend the law, which suggests that US lawmakers were not sufficiently considerate of the legislation’s potentially adverse impacts.

“Nobody in Israel wants a security crisis in the West Bank weeks before an election,” a source involved in trying to fix the law told Haaretz.

The amendment effort was impeded by a US government shutdown ongoing at the time, however.


Months earlier, in September 2018, the Trump administration slashed $200 million USD - more than 720 million shekels – in annual aid to the West Bank and Gaza Strip.


And only weeks prior, the US fully cut its aid to the United Nations Refugee and Works Agency for Palestine Refugees in the Near East (UNRWA) - an annual $350 million USD, or 1.2 billion shekels.


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