IMF warns Palestinians may face cuts without more aid

By REUTERS
March 17, 2012 08:01

 
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WASHINGTON - The International Monetary Fund on Saturday urged donors to meet their aid pledges to the Palestinian Authority, warning that unless funding was forthcoming it would be forced to cut public wages and social benefits to address a deepening fiscal crisis.

The IMF said the aid-dependent Palestinian economy had entered a "difficult phase" with a severe liquidity crunch worsening since last year due to a drop in aid from Western backers and wealthy Gulf states and Israeli restrictions on trade.

An IMF report released on Saturday, prepared for a donor meeting on Palestinian aid in Brussels next week, estimated a financing gap of about $500 million. The Palestinian authority is relying on donor aid to cover its 2012 budget deficit projected to reach $1.1 billion.

Most Palestinian aid comes from the United States, the European Union and Arab nations, allowing the Palestinian Authority to pay the salaries of public workers and benefits.

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