The Authority's financial crisis on the agenda of tomorrow's donor meeting in Oslo

The Ad Hoc Liaison Committee of donor states to the Palestinian Authority (AHLC) meets tomorrow, Wednesday 17 November, in Norway's capital, Oslo. The committee comprises 15 members, among them the United States, the European Union, the United Nations, the International Monetary Fund, the World Bank, Russia, Japan, Saudi Arabia, Canada, Jordan, Egypt, Tunisia, Norway, Israel, and Palestine. Norway chairs the committee, which meets twice a year — in Brussels, and in New York in September. The second meeting was postponed from September to November and moved from New York to Oslo.

The AHLC is the only venue that brings Palestinians and Israelis together since the halt of the peace negotiations, with the participation of some Arab states that have no official relations with Israel. The meeting principally discusses the deep financial crisis the Palestinian Authority is suffering — the deepest in years, as Palestinian prime minister Dr Mohammad Shtayyeh and the finance minister have described it. According to many observers, the causes of the deep financial crisis go back to: 1) a very sharp decline in international funding of the Authority — according to the World Bank report to be presented to the donors' meeting tomorrow, these contributions have fallen by 85% over the past 13 years. The international community's contribution in 2008 reached 1.2 billion dollars to the Palestinian Authority, its highest level ever; this year donor funds are expected to reach only 184 million dollars. 2) The coronavirus crisis had a heavy negative effect in reducing public revenues, foremost the clearance revenues with Israel and local taxes; that decline was accompanied by a large increase in government spending owing to rising unemployment and poverty across the Palestinian governorates. 3) Some Western states cut their support for the Authority over the state of human rights and the failure to hold the Palestinian elections, and as pressure toward internal reconciliation. The crisis likewise goes back to the weakness of support from some Arab states owing to political positions. Some Western states trimmed their financial contributions because of internal crises — the coronavirus crisis, the influx of millions of migrants, and the recession in the world economy caused by the pandemic.

Numerous statements have issued from Palestinian Authority officials that the Authority's fiscal deficit will leave it unable to pay its civil servants' salaries at the end of this year, and that this crisis may run another six months, until March 2022. The Palestinian prime minister's adviser for planning and aid coordination, Estephan Salameh, attributed the crisis to Israeli policies against the Authority, saying that Israel has aggravated the financial crisis of the Palestinian Authority's treasury by deducting from Palestinian tax funds sums now exceeding 200 million shekels a month. Salameh explained that the tax funds Israel collects on the Authority's behalf run to about 750 million shekels a month, against a 3% collection commission, and that Israel deducts new sums monthly — for water, sanitation, electricity, and health services.

Several news sources have reported that Israel will ask the donor states meeting tomorrow to continue supporting the Palestinian Authority. The Israeli newspaper The Jerusalem Post reported that Israel's regional-cooperation minister Esawi Frej of the Meretz party, who will take part in the meeting, will ask the donor states to restore payments and to invest particularly in projects related to water and health. Frej will meet in Oslo with Palestinian Authority prime minister Mohammad Shtayyeh — their first face-to-face conversation, as the same paper reported.

Although the Authority's collapse or weakening serves neither the region nor the international community, the Palestinian Authority must apply a genuine austerity policy that cuts unnecessary expenditures, and move to internal reconciliation in a way that supports the local economy and reduces the internal points of tension that drain resources already limited. It must likewise apply a genuine and serious policy against corruption and against the administrative and financial bloat that squanders resources, and work to terminate the monopoly contracts the Authority signed, by which it was deprived of control over sovereign economic sectors.

Dependence on the donor states exposes the Authority and the political project to political blackmail from Western and Arab quarters.