World Bank: Gaza economy is collapsing

“The economic deterioration in both Gaza and West Bank can no longer be counteracted by foreign aid, which has been in steady decline."

September 25, 2018 13:57
2 minute read.
Palestinian employees of United Nations Relief and Works Agency (UNRWA) wear orange jumpsuits as the

Palestinian employees of United Nations Relief and Works Agency (UNRWA) wear orange jumpsuits as they protest against job cuts, outside UNRWA headquarters in Gaza City September 19, 2018. (photo credit: IBRAHEEM ABU MUSTAFA / REUTERS)


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The Gaza economy is in a free fall with no viable solution on the horizon, the World Bank warned in a report it issued on Tuesday in advance of a top-level annual donor meeting on the sidelines of Thursday’s UN General Assembly session in New Yo rk .

Donor assistance, which is declining, can no longer halt the economic deterioration in Gaza and the West Bank, the World Bank said.

It plans to provide this information to the meeting – known as the Ad Hoc Liaison Committee – that will be hosted by the UN and chaired by Norwegian Foreign Minister Ine Eriksen Søreide. Among those attending will be US special envoy Jason Greenblatt; European Union foreign policy chief Federica Mogherini; Palestinian Authority Prime Minister Rami Hamdallah and Finance Minister Shukri Bishara; and Israeli Regional Affairs Minister Tzachi Hanegbi.

The AHLC meets twice a year and has continued to gather in spite of the dead- locked peace process and the tensions between the US and the Palestinians.

Participants at this particular meeting are expected to grapple with the US decision not to send the anticipated $200 million in bilateral assistance to the Palestinian Authority for fiscal 2017 and its decision to halt its funding to the United Nations Relief and Works Agency, which had amounted to $360 million annually.

According to the World Bank report, the Gaza economy is collapsing, register - ing negative 6% growth in the first quarter of 2018. The poverty rate in Gaza is 54%, meaning that every second person is living below the poverty line, the World Bank said.

“The economic and social situation in Gaza has been declining for over a decade but has deteriorated exponentially in recent months, reaching a critical point. Increased frustration is feeding into the increased tensions which have already started spilling over into unrest and setting back the human development of the region’s large youth population,” said Marina Wes, World Bank country director for the West Bank and Gaza.

The World Bank said on Tuesday that: “The economic deterioration in both Gaza and [the] West Bank can no longer be counteracted by foreign aid, which has been in steady decline, nor by the private sector which remains confined by restrictions on movement, access to primary materials and trade.

“Moreover, the deterioration in the fiscal situation leaves the PA with limited scope to provide relief. With donor funding declining and a full year deficit of USD 1.24 billion, the financing gap is projected at US $600 million,” the World Bank said.

“Against this background, a significant downside risk is the recent Israeli legislation to withhold clearance revenues (Tax and VAT collected by Israel on behalf of the Palestinian Authority), estimated at US $350 million per year,” the World Bank said.

It blamed a number of factors, including Israeli restrictions on goods and movement into Gaza and Palestinian Authority sanctions against the Hamas ruled enclave in an attempt to force Hamas to relinquish its authority there.

“We have reached a very challenging moment in the conflict between Israelis and Palestinians,” Søreide said in advance of Thursday’s meeting.

The gathering “will be important to confirm international support for a negotiated two-state solution. Viable Palestinian institutions are a precondition for the two-state solution. It is also essential to take practical steps which can strengthen the Palestinian economy,” Søreide said.

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