World Bank: Growth weak, aid dependency rising

A Palestinian refugee receives food from a United Nations food distribution center in the Shati refugee camp in Gaza City, August 2008. (Wissam Nassar/MaanImages)

JERUSALEM (IRIN) - Economic progress ha s been insufficient to stimulate growth in the Occupied Palestinian Territories because of the restrictions on movement, while dependency on aid was increasing, the World Bank said on 17 September.

In a report released ahead of a donors’ meeting on 22 September, the bank praised the reform efforts of the Palestinian Authority, saying appointed Prime Minister Salam Fayyad had managed to significantly reduce expenditure, cut down on government employment and begin reforming the security forces.

The international community helped the government with about $1.2 billion in budget support as of August, though $1.85 billion would be needed by year’s end.

“Assistance since the Paris Conference has been ad hoc and unpredictable,” the report stated, adding that the PA was unable to plan more than two months ahead.

At last year’s Paris Conference, the PA introduced its Reform and Development Plan and gathered pledges for $7.7 billion over three years, following the re-launch of peace talks with Israel in Annapolis, US.

The report, “Palestinian Economic Recovery: Aid, Access and Reform,” noted some Israeli concessions but stated that many restrictions impeding growth remained in place, including checkpoints and roadblocks, while Jewish settlements continued to expand.

An expected GDP rise of only 0.8 percent in 2008 — with a population growth of over 2.5 percent — was attributed to “a continued shrinking of the Gaza Strip economy and marginal improvement in the West Bank,” said a World Bank official on condition of anonymity. Before 1999, annual growth was about six percent.

A tight blockade on Gaza after the Hamas takeover of the Strip last year, with a complete ban on exports and only limited imports of goods, eliminated most business.

The blockade has also raised the cost of delivering needed humanitarian assistance to Gaza, the report stated.

Gaza deteriorating

The bank said the 19 June ceasefire between Israel and Hamas had done little to improve living conditions in the enclave.

Progress, including development work, had largely by-passed Gaza, the report stated, noting the poor delivery of essential services such as water, sewage and waste collection.

A report by the International Monetary Fund for the same donor meeting stated that unemployment in Gaza was more than 30 percent and inflation 18 percent. At least 79 percent of the population lived below the poverty line, with that number expected to grow.

A related PA document obtained by IRIN stated that aid “efforts will count for little if progress is not made at the political level to end the Israeli Occupation. Palestine is now the largest per-capita recipient of aid in the world,” it added, saying dependency would continue until the conflict was solved.

If the PA, Israel and donors cooperated better and the Gaza crisis was resolved, positive results would follow, the World Bank said.

“Recent experience has shown that economies entering a post-conflict period can expect double-digit rates of growth,” said a Bank official.

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