hamas cabinet 298 88 ap.
(photo credit: AP [file])
The Palestinian Authority's income fell by 60 percent after Hamas took power in March, even as the government payroll expanded, creating an increasingly unsustainable situation, the International Monetary Fund reported Wednesday.
Between April and September, the government took in just US $500 million, down from more than US $1.2 billion in the same period in 2005, the report said. Much of the drop was due to Israel's refusal to turn over an estimated US $360 million in taxes it collects on behalf of the Palestinians, a response to Hamas' refusal to recognize Israel.
Despite an international aid boycott of the Hamas-led government, some US $420 million in foreign aid reached the Palestinians between April and September, more than in all of 2005. This enabled the government to pay civil servants some 40 percent of their salaries in the past six months, the report said.
The bulk of the aid, some US $300 million, came from Arab countries and bypassed Hamas. Of the Arab money, US $246 million was transferred directly to moderate Palestinian President Mahmoud Abbas, bolstering his leverage as he tries to pressure Hamas to form a moderate government acceptable to the West.
Negotiations focus on setting up a technocrat government of independent experts for a year to get international aid flowing again. Hamas has balked at the idea, and talks have deadlocked.
Still, Abbas, known as Abu Mazen, is not using the growing flow of aid to his office to set up a rival government, said Abbas aide Saeb Erekat.
"If the international community is using the president's office to send help, they are welcome," he said. "That doesn't mean Abu Mazen tries to create an alternative government."
Hamas said it has an understanding with Abbas on how to spend the money. "We don't think the money is being used politically," said Hamas government spokesman Ghazi Hamad.
The IMF reported that Abbas' office "now bears formal responsibility for many of the government's overall receipts and expenditures." It said Abbas' relatively small staff lacks the expertise and capacity to take on most of the tasks of a Treasury, causing delays in disbursing the funds.
Economist Samir Hleileh, who served as Palestinian Cabinet secretary before Hamas came to power, said fewer than 10 people in Abbas' office are handling the donor money.
About 80 percent of the US $500 million in income in the past six months was spent on the ever-expanding government payroll and on fuel imports, leaving little for other budget items, such as welfare payments, the report said.
The report said the number of civil servants grew by 5,400 this year, to more than 142,000 in mid-June. Most of the hiring took place in the security services, and some 20,000 new recruits are currently being trained and could be added to the payroll in the future, the report said.
It now costs about US $100 million a month to cover salaries for government workers, compared to about US $80 million a month on mid-2005. The increase is also due to a generous across-the-board pay increase in late 2005.
"The government wage bill had already become unaffordable at the end of 2005," the report said. "Underlying the current fiscal difficulties is an increasingly unsustainable fiscal situation."
Hleileh warned that the current system of payments is setting back years of financial reform, carried out by former Finance Minister Salam Fayyad, who had set up a single Treasury account to clean up rampant mismanagement and corruption.
That control has been lost since some of the money is going to Abbas, some is paid to needy Palestinians directly by donor countries and some is smuggled into Gaza by Hamas officials.
"Nobody can say this is a step in the direction of financial reform," he said. "It's the opposite."