Palestinian public workers go unpaid as PA hit by ‘economic earthquake’

GAZA: The embattled Palestinian Authority (PA) has been forced to hold off payment of May wages for around 155,000 public employees due to an “economic earthquake” that has hit the country’s finances. Israel’s suspension of tax revenue transfers coupled with spending on the coronavirus disease (COVID-19) outbreak and Palestine’s economic recession have combined to create a financial perfect storm. Palestinian Prime Minister Mohammad Shtayyeh said: “If we have the ability to pay the salaries we will pay, and if not, we will wait a little longer.”

Israel usually collects tax returns on goods imported through its ports, and the PA uses its share to help toward paying the wages of employees in the West Bank and Gaza Strip, a sum that makes up about 70 percent of the authority’s total public spending. PA internal revenues along with foreign support make up the balance. Palestinian Finance Minister Shukri Bishara said that spending on tackling the COVID-19 crisis had drained the country’s coffers by as much as 70 percent.

Samir Abdullah, director-general of the Palestinian Economic Policy Research Institute (MAS) and former Palestinian minister of planning, told media that Palestine’s latest economic crisis differed from others because of the COVID-19 pandemic, Israel’s suspension of tax revenues, and recession in the Palestinian economy. He said: “The PA has faced an increase in expenditures as a result of measures to combat the coronavirus, the closure of the economy for about 70 days, as well as a decrease in revenues and high rates of unemployment.

“An earthquake has occurred in the economy, and there is a sharp drop in revenues, and according to estimates by the World Bank, taxes will decrease in the coming period as well. “The Palestinian Authority may not be able to borrow from the Palestinian banks again because it exceeded the maximum permissible limit of 10 percent of the total loans. The debts on the PA to Palestinian banks amount to about $1.8 billion,” he added.

Since 2012, foreign aid to the PA had decreased from $1.8 billion to around $700 million last year and Abdullah pointed out that the authority’s current economic crisis would affect all sectors and could ultimately lead to its collapse or bankruptcy. “The PA is based on a national project, and there will be patience from the employees, and they will not take to the streets in order to demonstrate that they have not received their salaries. There is political and economic solidarity in the Palestinian society,” he said.

However, Hamed Jad, an economic journalist for the Palestinian Al-Ayyam newspaper, predicted that the present financial situation would be short-lived. “This is just a stage that will not last long until solutions are reached. This is not the first time that a crisis like this has occurred, and tax revenues have been suspended. “Despite the crisis for everyone, Palestinian banks can lend to the Palestinian Authority, as the value of deposits amounts to $17 billion, and this may be the best solution until the current political crisis ends,” he said.