Palestine suffers major financial crisis

Palestine suffers major financial crisis

Palestine suffers major financial crisis

Palestinian protesters and foreign activists scuffle with Israeli soldiers during a demonstration ahead of “Nakba Day” in Beit Omar village, north of the West Bank town of Hebron. Israelis struggle to take their salaries from the government ahead of Ramadan. AFP photo

The Palestinian government in the West Bank is facing its “worst financial crisis” since its 1994 establishment, the Palestinian labor minister said July 1.

Ahmed Majdalani warned that a shortfall in the delivery of aid from Arab donor nations means the Palestine will be unable to pay employees their July salaries or pay off debts it owes to private businesses across the West Bank. “It is the worst financial crisis experienced by the Palestinian Authority since its founding,” he told Agence France-Presse. “What is available to the Palestinian Authority at the moment in terms of funds is not enough to pay government employee salaries this month, with Ramadan approaching,” he said. “It is not sufficient to pay the bills that the Palestinian Authority owes to private companies.”

The Palestinian Authority has frequently warned that it faces a massive financial shortfall that threatens its ability to pay thousands of government employees on time or even at all. A delay in salary payments would be particularly sensitive this month, as Ramadan begins on July 20, meaning many will be stocking up on food ahead of the fast-breaking iftar meal.

IMF bid rejected

Last July, Palestinian Prime Minister Salam Fayyad said the government would pay workers half-salaries because it faced a shortfall of hundreds of millions of dollars. “The current financial situation is worse than any previous circumstances and requires rapid intervention.” The Palestinian Authority government, headed by Fayyad, is expected to meet today to discuss the crisis and chart a path forward.

The crisis has been further revealed with the report that Israel sought a $1 billion IMF bridging loan for Palestine earlier this year but was turned down. Israeli daily Haaretz reported that Israel’s Central Bank chief, Stanley Fischer, approached the International Monetary Fund for the money after discussing Palestine’s financial crisis with Fayyad. Sometime after the IMF’s annual conference in mid-April, Fischer asked the body for the loan, which Israel would have taken on the Palestinians’ behalf.

Israel would then have transferred the money to Palestine headed by President Mahmoud Abbas, which would have repaid the money to the Israeli government. Israel would have remained responsible for repaying the loan to the IMF under the deal, but the institution eventually declined to make the loan available. The report said it turned the proposal down because it feared setting a precedent of making IMF money available to non-state entities, which as a non-state cannot directly request or receive IMF funding.

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