'Israeli restrictions deepen PA's fiscal crisis'

Unless donor support increases, PA might not be able to continue to provide services to its people, World Bank warns.

March 15, 2012 04:38
1 minute read.
Truck carrying fruit leaves Kerem Shalom crossing

Truck carrying fruit leaves Kerem Shalom crossing point 390. (photo credit: REUTERS)

The Palestinian Authority’s fiscal crisis has grown worse due to a decline in donor funds and continued Israeli restrictions, the World Bank warned in a report it published on Thursday.

The report was prepared in advance of a meeting in Brussels next Wednesday of a donor forum for the Palestinian Authority known as the Ad Hoc Liaison Committee.

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“Stabilization of the PA’s fiscal position compels immediate action by the donor community,” said Mariam Sherman, World Bank country director for the West Bank and Gaza.

Unless donor support is increased, the PA might not be able to continue to provide basic services to its people, the report warned.

Donor funding for the PA budget dropped by close to $1 billion in the past four years, it said. To make up the difference, the PA has increased its borrowing, the report said.

“In 2011 bank borrowing increased by NIS 984 million, raising total domestic debt to NIS 4.15 billion or about $1.1 billion. The PA’s local borrowing has almost reached the limit that the domestic banking sector can sustain,” the report said.

Israeli restrictions on the movement of goods in and out of the Gaza Strip and the West Bank continue to make it difficult for private- sector growth to properly fuel the economy, the report said.

In the past, Israel eased restrictions in the West Bank, but “there have been few recent measures,” the report said. The movement of goods in and out of the West Bank remains severely constrained, according to the document.

“All cargo must use a back-to-back loading system, where shipments are downloaded from Palestinian to Israeli trucks,” said the report. The procedure is slow and costly. It is also difficult for investors to get visas to enter the West Bank, the report said.

“In addition, PA legal and regulatory reforms, which had helped investor confidence in the past, have slowed,” the report said.

While the West Bank Palestinian economy grew by 5.8% in the first three quarters of 2011, that growth was down from 7.5% in that same period in 2010, the report said.

The Gaza economy, in contrast, grew by 25.8% in the first three quarters of 2011, according to the report. The double-digit growth was due in part to Israel’s easing of restrictions on Israeli imports.

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