Palestinian Authority close to huge budget deal

An increasingly confident Palestinian Authority appears to be on the verge of setting the biggest budget in its history.

According to PA sources speaking on Thursday, consultations took place this week between the Finance Ministry and the World Bank about the 2015 general budget.

While the Gaza Strip has figured in financial plans since 2007, the next year will see additional expenditures aimed at merging and rehabilitating institutions across both the besieged coastal enclave and the occupied West Bank, according to a PA source. There is also talk that Ramallah will be take over responsibility for the salaries of around 27,000 new civil servants in Gaza. 

Mohammad Mustafa, minister of the national economy in the new "consensus administration", has called on donor states at the Cairo International Conference for Reconstruction to allocate $1.3 billion next year to support the Palestinian budget.

The budget for 2014 reached $4.21 billion, divided into $3.86 billion for the general budget and $350 million for development plans.  

Unprecedented

Samir Abdullah, head of the Palestinian Economists' Association, said that the budget next year will exceed the benchmark of $5 billion for the first time in the history of the authority. Reasons for the leap include merger plans between Gaza and West Bank groups that were agreed during the reconciliation meetings between Hamas and Fatah.   

Seven years of siege on Gaza by the Israeli state and closure of the territory's borders have led to a sharp decline in living standards and the local economy.

"Next year Gaza will need to rebuild its government institutions, restore previous economic growth rates, and reduce the high rates of unemployment and poverty. All of this will require huge sums of money," the source told al-Araby al-Jadeed.

The economic situation in Gaza is dire, with the strip's share of the overall Palestinian economy currently standing at only five percent, while in 2007 it made up 30 percent. The unemployment rate for the first half of 2014 soared to 44.5 percent, while 75 percent of the population are food insecure.   

Donors

Economic researcher Muhannad Aqel said the government feels confident enough to increase the general budget for the next fiscal year to more than $5.5 billion, after donor states agreed to extend an additional $2.5 billion to the PA over the next three years.  

"It is true that the Cairo conference collected an amount of money to be used for reconstruction in Gaza," the government official said. "But this sum is below the expectations of the consensus government, which means the latter will bear part of the expenses. The central authority is also supposed to provide funds for development projects that were not included in the reconstruction plans, aimed at reducing unemployment."

According to a study conducted by the Palestinian Economic Council for Development and Reconstruction, Gaza needs $7.8 billion for reconstruction. Aqel said that the government wagers on making revenues for its treasury now it has financial control over the land strip, which makes this budget likely to be presented early next year. 

Potential revenues include fees collected for processing government paperwork, as well as taxes and customs levied on Gaza's imports and exports.

Shukri Besharah, minister of finance, said early last week that the size of the government expenditure in the Gaza Strip currently ranges between 45 to 50 percent of the total PA monthly budget, which puts "a huge burden on any state or government under occupation". Such a burden, in the long run "is unthinkable", he added.

This article is an edited translation from our Arabic edition.