'Halting Gaza cash counterproductive'

World Bank president, IMF managing director and Quartet's Blair sign joint protest letter to Olmert.

gaza bank 248 88 ap (photo credit: AP [file])
gaza bank 248 88 ap
(photo credit: AP [file])
Israeli restrictions on cash shipments to Gaza banks, meant to weaken the territory's Hamas rulers, are largely counterproductive and ultimately harm Palestinian moderates, top international aid officials warned in a letter to Prime Minister Ehud Olmert. The letter, obtained by AP, was signed by World Bank President Robert B. Zoellick, International Monetary Fund Managing Director Dominique Strauss-Kahn and international Mideast envoy Tony Blair. It marked the highest-level intervention on the issue yet, following a growing cash crunch in Gaza. The three also expressed concern about a decision by two Israeli banks to sever correspondent relationships with Palestinian counterparts. The two developments "may have a considerable impact on the Palestinian economy and its institutions, and ultimately on Israel's longer-term relationship with the Palestinians," the letter said. In Israel, Foreign Minister Tzipi Livni held consultations with senior advisers Sunday. She asked the director general of her ministry to come up with an action plan, both concerning the cash shipments and the banks' decision to cut ties with Palestinian counterparts. Officials in her office said the matter is considered urgent, but no deadline was set for a decision. Israel imposed restrictions on Gaza after the Islamic terror group Hamas seized the territory in June 2007, ousting the forces of Palestinian Authority President Mahmoud Abbas. Israel declared Gaza a "hostile entity" and largely sealed its borders, allowing in only humanitarian supplies and a trickle of commercial goods, while banning exports from Gaza. The long-term objective is to weaken and eventually topple Hamas, Israeli politicians have said. In the short run, the restrictions are used to pressure Gaza terrorists to halt rocket fire on Israeli border towns. Despite the closures, Israel continued to send trucks carrying Israeli shekels into Gaza from time to time, in line with interim peace deal of the 1990s that made the shekel the currency in the Palestinian areas. The cash shipments to Gaza banks are needed mainly to enable Abbas's West Bank-based prime minister, Salaam Fayad, to pay 77,000 government employees in Gaza who remain loyal to Abbas. These payments help shore up support for Abbas in Gaza, sustain one-third of Gaza's 1.4 million people and prevent the collapse of the blockade-battered Gaza economy. Following a new round of rocket attacks, Israel suspended cash shipments altogether, starting in October. By last week, Gaza banks only had 47 million shekels ($12 million) in their vaults, less than one-fourth of what is needed to cover Fayad's monthly payments to Gaza. A few days later, Israel sent an emergency shipment of 100 million shekels ($26 million) in bank notes, less than half of the 250 million shekels ($64 million) requested by Fayad. Government employees were able to withdraw only part of their salaries from the banks. Prime Minister's Office spokesman Mark Regev said he expected Israel would send more shipments. However, Oussama Kanaan, the chief IMF representative in the Palestinian territories, said Israel and the Palestinian Authority must reach a long-term agreement on regular monthly shipments of shekels. "People have to have some comfort that the same serious problems will not be recurring every month," he said. A disruption of the cash flow will undermine the Palestinian banking sector as a whole, hurt trade between Israel and the Palestinian areas and divert resources to unregulated cash transactions, the aid officials wrote to Olmert. "The aggregate, and no doubt, unintended result of those policies is to weaken the institutions of Prime Minister Fayad's government ...," the officials wrote. The letter also addressed the decision by Bank Hapoalim and Israel Discount Bank to sever ties with Palestinian banks by the end of the month. The banks are concerned they might run afoul of international anti-terrorism regulations by dealing with Gaza banks and thus be vulnerable to lawsuits. Once the ties are cut, it would be increasingly difficult for Israeli and Palestinian traders to do business. The aid officials noted that severing the ties would undermine Palestinian banking institutions that "have imposed stringent laws against money-laundering and the financing of terrorism."