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.