PA officials pocket fifth of West Bank GDP

World Bank report says economy failing


By Nathan Jeffay, March 22, 2012
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Poverty in Ramallah: despite foreign aid worth $983m last year, the PA will run a deficit of $1.1bn this year

Poverty in Ramallah: despite foreign aid worth $983m last year, the PA will run a deficit of $1.1bn this year

While the Palestinian economy is in a state of "severe fiscal crisis", wages for Palestinian Authority staff eat up a staggering 20 per cent of GDP, according to a World Bank report released on Wednesday.

The report also points out that international aid has kept the Palestinian welfare state running but has not succeeded in kick-starting the private sector.

The full extent of the dependency is only clear now that the global economic crisis has eaten away at aid contributions. The report found that in 2011 the Palestinian Authority needed about $1.5 billion in budget support, but received only $983 million. It concludes that in 2012 it is expected to have a recurrent budget deficit of around $1.1 billion.

"A continuation of the current trend of reduction in donor aid would likely aggravate the Palestinian fiscal crisis, potentially jeopardising gains made in recent years in institution-building," according to the report. It is "imperative that donors increase support to the PA to keep basic services functioning".

But while officials in Ramallah will welcome this fundraising drive on their behalf, they will be uncomfortable about one of the subjects raised lower down the report. It shows that they have built the Palestinian Authority in to a bloated institution with an enormous payroll.

PA wages account for one fifth of the GDP. This is more than double the norm in the Middle East and North Africa, a region famed for unusually high public sector wage bills in comparison to the rest of the world. Using delicate language, the World Bank acknowledges what every Palestinian knows: that there are people sitting in some offices doing not very much, who are there because of family or social connections.

"Over the life of the PA, growth in the numbers employed and the wages paid have often been driven by social considerations, and the civil service has at times been considered an employer of last resort," it admits.

One fact that is incongruous in its absence is that a significant amount of the wage budget goes to Palestinians who are imprisoned by Israel for security offences, including blood-on-their-hands terrorists.

The 31-page document gave a bleak prognosis for the economy as a whole.But it did report an improving situation in Gaza - and even gave Israel some credit for this.

The "continued recovery" in the Strip can be attributed in part to "a combination of aid inflows and easing of restrictions by Israel".

Nevertheless, when referring to the overall picture, the report points a finger at Israel, claiming that Palestinian efforts at recovery "will not be successful unless they are supported by concrete and known actions of the Government of Israel." To flourish, the Palestinian private sector needs "a lifting of Israeli restrictions on access to land, water, a range of raw materials, and export markets".

Last updated: 4:27pm, March 22 2012