Obfuscation never helped anyone: the Palestinian fiscal crisis

Norwegian Foreign Minister Jonas Gahr Støre commended Palestinians and Israelis “for their spirit of cooperation and their positive contributions to the deliberations” at this year’s annual Ad Hoc Liaison Committee that took place on Wednesday in Brussels.

In preparation for the meeting the Palestinian Authority, the International Monetary Fund, the Quartet and Israel all released reports discussing the current fiscal crisis of the PA. Three out of four of the above bodies placed the majority of blame for the PA’s $.5 billion deficit on the failure of Western and Arab donors to make good on their promised donations.

Israel’s report instead focused on the inadequacy of the PA’s institutions as evidence that unfortunately an independent statehood is just not in the cards.

One has to laugh at the somewhat farcical political theater in Brussels: donors meeting with the Palestine Authority, Israel and the IMF to put their heads together and think about what is to be done about the struggling economy in the Palestinian Territories.

As could be expected it appears that the majority of the meeting was devoted to urging donors to fulfill pledges and the PA to implement “structural reforms” (over what structure they have control is not clear). Minimal lip service was given to Israel’s role, as it was urged to ease restrictions on movement and expedite the process of collecting clearance revenues on behalf of the PA.

It’s as if, if they arrange their words carefully enough and frame economic development in Palestine just so, Israel will wave their wand and relieve the occupied Palestinian territories of its chains.

This is not just a display of normalization of the worst order—one that assumes Israel is also interested in Palestine’s best interests—but it is also leading Palestine to a dead end as always. Israel has used the current fiscal crisis in the West Bank as fodder for its argument against Palestinian independence—so it doesn’t appear that Israel is going to choose to see the light any time soon and come to the revelation—“Oh, if we just gave them back their land, water and borders, then they could develop a viable economy. Why didn’t you say so to begin with?”

Even though donor aid is problematic in that it is more often than not tied to political conditions, it is nevertheless needed. As economist Raja Khalidi said in an interview with Amira Hass, “The PA should neither be ashamed to be dependent on aid, nor should it aim to reduce it; rather it can consider more effective ways of using the aid.”

After all, until Israel ends the occupation, the PA and its economy have little other alternative.

It is no secret what underlies the poverty that plagues Palestine.

Take for example a press release that was written by the PLO Negotiating Affairs Unit and was interestingly enough distributed on the same day as the AHLC meeting. Unlike this week’s donor meeting, the press release does not mince words on the real cause of the slowdown in the West Bank’s economy.

“The Palestinian economy is indeed ailing from the continued Israeli occupation as well as the illegal actions undertaken by the Israeli government, which threaten to make the occupation permanent.”

In the report, the Negotiating Unit outlines just how expensive Israel’s occupation is for Palestinians, and how Israel controls any kind of development through its stranglehold over Palestinian trade and natural resources.

The reports cites a 2011 study conducted by the Palestine National Authority that found that in 2010 the Israeli occupation cost 6.897 billion USD, which was 93.3% of the total Palestinian GDP of that year. That total cost of the occupation is the sum of things like restrictions in trade that cost Palestinians a total of 1.96 billion USD per year; producing electricity in Gaza under occupation (441 million USD per year); and withholding fees (16 million USD) to name a few.

That is one way to calculate the “costs” of the occupation. Of course there are other, more humane terms to assess the costs of a military occupation. Consider that right now the fuel crisis in Gaza is preventing hospitals from operating at full capacity and homes from getting clean water; factories are forced to shut down, rendering thousands more unemployed.

But don’t worry, Tony Blair is hard at work, scratching his head to try to come up with his latest plaything that can be outfitted as step towards joint-cooperation and peace, but really just fills his coffers.





As if we have learned nothing from the history of IMF, structural adjustment, and neoliberal economic policies in general. In almost all the cases, countries often end up in a worst situation than they were in. Chile, India, Argentina, Mexico, etc. can offer a few historical examples. Sure the GDP may increase sometimes, but it's always at the cost of decreased necessary social services like healthcare and education, widening development gap between rich and poor coupled with concentration of wealth in fewer hands, and increased corruption--something the PNA has a thorough history with. Then you add the Israeli colonial occupation to the mix and you're looking at a recipe for disaster. Fayyad should stop pandering to failed and harmful western economic policies imposed by his occupied and their allies, and instead focus on trying to make the Palestinian economy less dependent on them. Aid should be secured from donors who don't place such conditions on structural restructuring, and economic cooperation should be expanded with developing countries attempting the same thing. Domestically, labor laws and quality oversight are nonexistent, and without rights to protect the workers, you're never going to improve economic conditions. Health and quality standards need to be enforced as well. Finally, unless there is a mechanism for oversight of corruption, increased accountability of government, and strengthening of democratic institution, Palestine will continue to be in terrible political and economic condition.

Charlotte Silver

Charlotte Silver's picture

Charlotte Silver is an independent journalist and regular writer for The Electronic Intifada. She is based in Oakland, California and has reported from Palestine since 2010. Follow her on Twitter @CharESilver.