After the war in Gaza started, the economic reality in Ramallah took a brutal turn. Security guards have been appointed to prevent theft of goods from supermarkets. Thousands of businesses have closed. The government officials there say that the economic crisis that has started there is more serious than the lockdown due to corona. News from The Economist.
Jewish-owned businesses in the West Bank and an estimated 160,000 Palestinians working in Israel lost their jobs after the October 7 Hamas attack. However, millions more Palestinians work illegally in Israel. Before the start of this war, they used to operate 370 million or 370 million dollars in the economy of the West Bank.
Since Palestine does not control its own borders, the Palestinian Authority (PA) depends on Israel to collect import duties, which account for 64 percent of its total revenue. When the war in Gaza started, Israel's far-right finance minister, Bezalel Smrtich, refused to transfer any more money to the PA.
Although Israel's parliament subsequently compromised; Then they said, the money that the PA gives to Gaza will be deducted and the rest will be given. PA Finance Minister Shukri Bisara angrily rejected Israel's offer. "Accepting this money would be a violation of our social contract with the Palestinians living in Gaza," he said.
The reality is that although Hamas has controlled Gaza since 2007, the PA still bears much of the responsibility. For example, Gaza's electricity bill is still paid to Israel. In addition, they pay the salaries of thousands of government officials including the Ministry of Health, members of the Palestinian Security Forces. Palestinian security forces are paid to stay at home.
Because of them, PA's revenue has dropped by 80 percent since October 7. As a result, Finance Minister Bisara now has to manage the government with a revenue deficit of about one and a half billion dollars or 1.5 billion dollars. In November they were unable to pay government employees, although they managed to convince the Bank of Palestine to loan half of the salaries to some workers.
About 30 percent of the PA's operating budget comes from foreign aid, but this year that amount has dropped to just 10.7 percent. Despite this, the Palestinian economy is still heavily dependent on aid. Donor groups are now financing development rather than providing direct budget support, partly because of widespread corruption in PA authorities.
Due to these reasons, PA is not in a good position to deal with the economic crisis.
Another thing is that since they are not members of the International Monetary Fund or IMF, they are not getting help from there either. They don't have a central bank, they don't really have anyone to rely on. As a result, Gaza's banks are in jeopardy, sweating after defaulting on almost $1 billion in debt. Loans to normal workers are good for the economy; But now the situation is such that if they are not paid soon, thousands of workers will default on consumer loans.
Money laundering has become increasingly common, particularly among Palestinian nationals who are reportedly trying to migrate to other parts of the Gulf, including Jordan. In this situation, Palestinian Authority Finance Minister Bisara has become cautious about borrowing from the country's banks. Because financial stability may be threatened.
In this situation, Palestinian Authority Finance Minister Bisara could pressure the Israeli Finance Minister to waive the tariff revenue, although it remains doubtful whether he will do so. The United States and the European Union have expressed concern over the payment of salaries to 30,000 Palestinian security forces in the West Bank. They feel that if security personnel are not paid, the security system will be threatened.
The Palestinian Authority has been forced to ask Qatar for $900 million over the next six months, but the Gulf states, including Qatar, are unwilling to take responsibility for the money Israel was supposed to pay. Again, if the Palestinian Authority takes this help, they may come back from the commitment that Israel had under the Oslo Accords.
But there are concerns about such financial support. That is, because of this, on the one hand, while corruption may continue, the necessary institutional reforms may also be disrupted. As a result, the Palestinian Authority is now facing major challenges in managing the West Bank and Gaza. It is feared that it will remain in the future.
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