A Year of Decline: The Financial and Institutional Status of The Palestinian Authority

28 Apr 2007

1. Palestinian Finance Under Siege: Economic Decline and Institutional Degradation by Karim Nashashibi, the former head of the International Monetary Fund (IMF) in the West Bank and Gaza Strip.

2. The Impact of the Palestinian Authority’s Year of Decline on its Employees. The Case of Jenin.

These two Special Focus papers concerning the situation in the occupied Palestinian territory (oPt) are published one year after the withholding of customs payments by the Government of Israel (GoI) and the change of policy of Western donors towards the direct funding of the Palestinian Authority (PA).

In a thought-provoking thesis, Karim Nashashibi documents the economic decline and nstitutional degradation that have followed in the wake of what he calls “the financial siege” of the PA.

He laments what he sees as “the loss of transparency and accountability” following the establishment of parallel payment mechanisms, including the Temporary International Mechanism (TIM), which he claims is “causing a reversal in progress attained over a decade of reforms and capacity building”.

Dr Nashishibi’s report is an independent analysis. In his own words, as former head of the IMF in the West Bank and Gaza Strip, it provides a stimulating and timely debate.

To complement this article, OCHA conducted its own field research into the humanitarian impact the financial crisis is having at a community level and the extent to which parallel payment systems are providing relief to PA employees who have not received full salaries for more than a year.

A series of interviews with PA employees were carried out in Jenin, which has one of the highest percentages of PA employees in the West Bank, and where the population has been deeply affected by the loss of regular salaries.

Key findings and observations of the two papers:

The transparency and accountability of the PA —built up over a decade at the insistence and expense of the international donor community— has been severely undermined by the withdrawal and withholding of funds.
Palestinian communities and PA employees in particular, resent their forced return to dependency on welfare, their ‘de-development’ and loss of self-reliance. They call for a return to fully salaried work and the restoration of basic services provided by the PA.
Interviewees, particularly the educated, acknowledge the downturn in their fortunes was triggered by the election of Hamas in January 2006 and the subsequent collapse of the PA, but blame their plight on the continuing Israeli occupation and the policies of the international community.