The Palestinian Authority faces a fiscal crisis that could threaten its existence, in part because it keeps expanding the public payroll despite its sharply reduced revenues, the World Bank said in a report released Wednesday.
The Palestinian economy declined further in 2006 from an already low level, and the per capita Gross Domestic Product (GDP) dropped by at least 8 percent, said the report, obtained by The Associated Press.
The decline coincides with an international boycott of the Islamic militant Hamas, which came to power a year ago. Since then, foreign aid has been redirected to moderate Palestinian Authority Chairman Mahmoud Abbas or disbursed as direct salary or welfare payments to Palestinians.
The overall level of aid has declined, from about $1 billion in 2005 to more than $700 million in 2006. Most development programs have been cut, and the bulk of the money now goes to budget support.
About 25 percent of the Palestinian labor force is unemployed, the report said. In Gaza, the rate is even higher, with 36 percent, up from 29 percent the year before.
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