Development of Area C is necessary for sustainable Palestinian economic growth,
the World Bank said in a report it published Wednesday calling for donor
countries to pledge $400 million to fix a shortfall in the PA’s 2012 budget when
the Ad Hoc Liaison Committee meets in New York on September 23.
do need to act urgently in the face of a serious fiscal crisis facing the PA in
the short term,” World Bank Country Director for the West Bank and Gaza Mariam
“But even with this financial support, sustainable economic
growth cannot be achieved without a removal of the barriers preventing private
sector development, particularly in Area C,” she said.
According to the
report, the Palestinian Authority is projected to have a $1.5 billion deficit by
the end of 2012, for which only $1.1 b. has been raised from donor
The nations who gather Sunday for the New York donor
conference will be asked to make up the additional $400 m. sum, the report
If the money is not found, the PA will face a severe budget crisis,
the report warned.
“The PA’s local debt is almost at the limit that the
banking sector can sustain and therefore it is unlikely that the banks will be
providing additional financing,” the report said.
“It is also doubtful
that private suppliers will be providing further credit given the current high
level of arrears,” the report said.
“If no additional donor funding is
identified, the PA may be forced to finance the gap though accumulating
additional arrears to the pension system and cutting some of its basic spending
such as wages, which could have severe social impact,” the report
It explained that the PA’s recurrent deficit for the first half
of 2012 was 32 percent beyond what had been anticipated.
expenditures and net lending were 4.5% above budget while revenues were 7% below
their target, the report said.
It warned that Palestinian budget woes
would continue unless it could increase private sector investment through the
development of Palestinian holdings in Area C in the West Bank, which is under
Israeli military control.
The document noted that Israel had taken some
steps to help Palestinian development of Area C.
The World Bank report
said that, according to the Foreign Affairs Ministry, 119 Palestinian
infrastructure projects for Area C were approved in 2011.
It added that
according to the ministry, eight master plans for the development of Area C were
Separately, the report also said that Israel and the PA
had reached an understanding to expand trade between them and streamline
clearance revenue procedures, starting in 2013.
Still, the report said
that restrictions on Palestinian movement and access remained a major impediment
to Palestinian economic growth. It also called on Israel to remove obstacles to
the Palestinian development of Area C.
Overall, it said, “the continued
geographical fragmentation of Area C poses a binding constraint to real economic
growth, essential to support the future Palestinian state.”
Israel: PA monetary problems connected to world economic crisis
Ministry spokesman Yigal Palmor had not yet seen the report, but had heard that
it chastised Israel for not doing enough to protect Palestinian freedom of
movement or development in Area C.
He noted that the world economic
situation was deteriorating, and it was important to see the Palestinian’s
monetary situation within the larger global context.
“It is normal for
the Palestinian economy to be weak because it is not disconnected from the
global economy. Maybe before asking Israel to do more they [the World
Bank] should take stock of the deteriorating economic situation in Israel and
Europe and the rest of the world,” he said.
He noted that Arab countries
such as Qatar and Saudi Arabia could also save the day by “writing checks” to
the PA, and not just issuing “empty statements.” Palmor said that Israel has
lifted road-blocks, checkpoints and issued additional permits for Palestinians
to work in Israel.
Earlier this month Israel gave the PA an advance
transfer of NIS 250 m. in tax funds.
An Israeli official added that a
final status agreement would vastly improve the Palestinian economy and pave the
way for increased private investment in the Palestinian territories. The
official called on the PA to return to the negotiating table to conclude such an
agreement with Israel.