Palestinian financial crisis at 'breaking point,' UN envoy warns

UN envoy Tor Wennesland: "Estimates suggest that the PA will have a 2021 budget deficit of around $800 million."

 A child waves a flag as demonstrators take part in a protest in solidarity with Palestinian prisoners in Israeli jails, in Ramallah in the West Bank September 8, 2021. (photo credit: MOHAMAD TOROKMAN/REUTERS)
A child waves a flag as demonstrators take part in a protest in solidarity with Palestinian prisoners in Israeli jails, in Ramallah in the West Bank September 8, 2021.
(photo credit: MOHAMAD TOROKMAN/REUTERS)

The Palestinian Authority’s financial crisis is at a “breaking point,” UN Special Coordinator for the Middle East Peace Process Tor Wennesland told the Security Council, as he called on Israel to stop penalizing the PA for its terrorist payments.

“Donor support, including direct budget support, continues its multiyear decline,” Wennesland told the 15-member body at its monthly meeting on the Israeli-Palestinian conflict.

“Estimates suggest that the PA will have a 2021 budget deficit of around $800 million. This would nearly double the 2020 gap,” Wennesland said, adding that the “borrowing capacity of the PA with the banks has been exhausted.”

He took specific issue with Israel’s policy of penalizing the PA for providing monthly stipends to terrorists responsible for killing Israelis as well as to their family members in what Israel has dubbed as “pay for slay.” Israel withholds the sum spent on terrorist payments from the tax fees it collects on the PA’s behalf and transfers to Ramallah.

“Along with other long-standing fiscal leakages that are contributing to the financial crisis, Israel continues to deduct millions of US dollars per month from clearance revenue transfers, in response to Palestinian payments to security prisoners, their families and the families of those killed in the context of attacks,” Wennesland said.

United Nations Special Coordinator for the Middle East Peace Process Tor Wennesland. (credit: Wikimedia Commons)United Nations Special Coordinator for the Middle East Peace Process Tor Wennesland. (credit: Wikimedia Commons)

He acknowledged that, since coming into office in June, Prime Minister Naftali Bennett had skirted Israel’s deduction policy by approving a NIS 500m. loan against future tax fee payments Israel would collect.

That loan was “critical,” Wennesland told the council, “but only delays temporarily the looming crisis and does not address the structural impediments imposed on the Palestinian economy.”

Wennesland called on both Israelis and Palestinians to implement policy reforms that would improve the PA’s financial situation. He also called on the 15-member Ad Hoc Liaison Committee which oversees donor funding to the PA to address the issue when it meets in Norway in November.

He did not mention the impact on the PA of the technical delay in annual European Union funding of some €140m. Budget delays in Brussels have meant that the PA has yet to receive any direct EU funds, and may not see that annual sum until next year.

Britain’s Ambassador to the UN in New York Barbara Woodward said she is concerned that the PA would not be able to pay its salaries in November.