ei: World Bank approves US$20 million grant as budget support to the Palestinian Authority

Arafat's destroyed compound in Ramallah following Israel's April 2002 "Operation Defensive Shield". The Muqata' as the compound is known, is the Ramallah district headquarters of several Palestinian Authority offices and security forces. (Ronald de Hommel)

RAMALLAH -- The World Bank has approved an emergency structural adjustment grant of US$20 million to be used as part of the Bank's response to the immediate needs of the Palestinian Authority (PA) for budgetary assistance. After more than three years of crisis, the PA is facing severe economic and fiscal challenges with a financing gap estimated at US$650 million for 2004.

The grant will be closely aligned with the Public Financial Management Reform Trust Fund and will support the same reform program underpinning this Fund. The Reform Fund, approved by the Bank's Board on April 22, is a Bank-administrated multi-donor instrument designed to channel budgetary aid to the Palestinian Authority against the achievement of a number of reform benchmarks. Contributions to the Reform Fund to date total US$25 million and discussions are ongoing with donors to raise additional support.

"Within the West Bank and Gaza and the broader donor community," says Nigel Roberts, Country Director, "the provision of budgetary support is widely regarded as vital in maintaining a functioning Palestinian Authority. While other welfare instruments do exist and have proven their effectiveness in different ways, we believe that budgetary support possesses a significant leveraging potential, both in terms of donor support and in pushing forward a far-reaching reform agenda in the public financial management sphere."

Sustaining the PA's ability to deliver basic services is one of the strategic objectives of the World Bank's program in the West Bank and Gaza under the current emergency situation. In the past, budget support has proven effective in preventing perhaps 100,000 people from falling into poverty and in sustaining demand, critical to supporting the fledgling private sector.

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