The World Bank said that the Palestinian economy is now facing a severe shock in regard of public finances as a result of Israel's approach over tax revenues, calling for an urgent resolution of the crisis before it deepns.
This came in a report that the World Bank has prepared on Wednesday and is due to be presented to the Ad Hoc Liaison Committee (AHLC) at its next meeting in Brussels on 30 April.
The report quoted Anna Bjerde, World Bank Acting Country Director for West Bank and Gaza and Director of Strategy and Operations for the Middle East and North Africa Region, as saying: “The economy, which in 2018 saw no real growth, is now facing a severe fiscal shock because of the standoff over clearance revenue transfers.”
Bjerde stressed that “Urgent resolution is needed to prevent further deterioration of economic activity and living standards. Clearance revenues are a major source of budgetary income and the ongoing standoff is felt by all segments of the population in what is already a weak economy.”
In February, Israel decided to deduct around $10 million a month from the revenues — the sum the PA paid families of prisoners or prisoners themselves serving time in Israeli jails — prompting the Palestinians to refuse any funds at all.
“Against a background of declining aid flows, the recent standoff stemmed from Israel’s unilateral deduction of US$138 million from the PA’s clearance revenues in 2019 to offset estimated payouts to Palestinian martyrs and prisoners’ families,” the report noted.
According to the World Bank, “the clearance revenues, collected by Israel and transferred to the PA monthly, amount to 65 per cent of the PA’s total revenues. In response, the PA rejected the diminished transfers and was forced to cut the wage bill by 30 per cent, reduce expenditures in social assistance, and borrow more from local banks. If not resolved, the standoff will increase the financing gap from US$400 million in 2018 to over US $1 billion in 2019.”
“The dual-use goods system in its current application limits economic diversification and sustainable growth in the Palestinian territories. A revamp of the application of the restrictions on dual-use goods is critically needed,” added Bjerde.
The report stressed that “The Palestinian economy has witnessed low growth rates that are not able to keep up with the growth in population, resulting in an increase in unemployment and deteriorating living conditions. The absence of growth in the past year is mainly attributed to the steep deterioration in Gaza, where more than half of the population is unemployed and economic activities contracted by 7 per cent in 2018—the deepest economic downturn Gaza has witnessed that is not a result of a conflict. However, growth in the West Bank has also slowed below its recent trends.”