Mohammed El-Samhouri

With Hamas in control of the Palestinian Authority (PA) government, and Western donors are halting all direct aid to it, an already precarious humanitarian situation in the West Bank and Gaza could potentially turn worse. Virtually bankrupt, the PA needs $120 million a month to pay its staff, and an additional $40 million for continued minimum basic services to its constituency. With Israel suspending the transfer of $60 million a month in Palestinian customs receipts, the $35 million the PA collects each month in domestic revenues are not enough to keep it afloat.

The sudden ascent of Hamas to power after the January 25 parliamentary elections in the Palestinian Authority (PA) areas has put at risk two vital sources of Palestinian finance: an aid package by Western donors of about $1 billion a year in humanitarian, developmental and budgetary support; and a monthly transfer by Israel of about $55 million in customs and tax revenues that it collects on behalf of the PA. Preserving the status quo, where international aid and customs revenues transfers are maintained at their 2005 levels, would not prevent Palestinian economic conditions from deteriorating.

Sharon’s unilateral “disengagement” plan from Gaza does not seem to bode well for the future of the economy of the Gaza Strip. A careful reflection on the economic ramifications of what the plan has to offer will lead to this unfortunate outcome. The formidable challenge facing all concerned parties is how to make the Israeli pullout from Gaza, if and when it happens, a success to be emulated in other parts of the Palestinian occupied territories, and not a blunder to be regretted later on. Dr. Mohammed El-Samhouri, a senior economic advisor to the Palestinian Minister of Foreign Affairs, examines the plan.