x Abu Dhabi, UAEFriday 28 July 2017

Palestinian Authority employees on half-pay as Arab donors fail to stump up

A failure by some donor countries to meet their financial pledges to the PA, whose budget is largely reliant on foreign aid, means that the PA has nearly reached its borrowing limit and cannot pay full salaries.

JERUSALEM // The prime minister of the Palestinian Authority has warned that government employees would be paid only half their salaries this month, because of what he called a “financial crisis”.

Salaam Fayyad attributed the problem to what he called a failure by some donor countries to meet their financial pledges to the PA, whose budget is largely reliant on foreign aid.

He painted a bleak financial picture of a bureaucracy that he has attempted to streamline, just as the Palestinians prepare to present their case for statehood recognition to the United Nations in September.

Mr Fayyad warned that the PA had amassed a total domestic debt of US$840 million at the end of last year, and had nearly reached its borrowing limit.

“The government has decided to pay employees half their salary due to the financial crisis that the Palestinian Authority is experiencing because of the failure of donors, including our Arab brothers, to fulfil their pledges,” he said at a press conference on Sunday.

Mr Fayyad said the PA has been experiencing a monthly budgetary shortfall of roughly US$30 million. Only about a third of the US$971 million pledged by donor countries has so far been transferred into the PA’s coffers, creating the monthly gap that he said was bridged with bank loans.

“We tried to deal with the financial crisis by borrowing from banks and we were able to alleviate the problem somewhat by taking out loans, but the deficit that is accumulating from month to month has gotten to the point that is can no longer be addressed with bank loans.”

He credited the UAE, along with Oman and Algeria, for maintaining their financial commitments but made a special plea to other Arab countries for support.

In response to a reconciliation agreement between Fatah and Hamas, Israel refused in May to pay the PA the monthly tax revenues it collects on its behalf. The tax-collecting arrangement was established as part of the 1993 Oslo Accords.

hnaylor@thenational.ae