Around 153 000 employees of the Palestinian Authority (PA) will not be paid this week if Israel continues to withhold $100-million (£64.5-million) in monthly Palestinian tax revenues, which it is obliged to pass on under the terms of the 1993 Oslo accords.
The impact will be widely felt by the one-third of Palestinians who depend on the salaries of public sector workers, which include security personnel, in the West Bank and Gaza.
Without the revenue, “the PA will not be able to deliver on its commitments”, Hasan Abu Lideh, minister of national economy, told the Guardian. As well as employees’ salaries, the PA would be unable to meet other bills and loan repayments. “Withholding this money — which is Palestinian money, not Israeli money — is basically an act of war on the PA,” he said.
Israel imposed the punitive measure on the Palestinians following its admission to the United Nations Educational, Scientific and Cultural Organisation (Unesco) almost a month ago.
Israel has since been urged to release the money by the United States, the UN and the Middle East Quartet envoy Tony Blair due to fears that the non-payment of salaries could lead to a security breakdown.
The Palestinians’ admission to Unesco did not justify Israel’s move, said Abu Lideh. “Pursuing our interests should not be a reason for Israel to withhold payments that are due to us. What is the difference between holding someone at gunpoint and taking their money, and what Israel is doing?”
Slowing the economy
The loss of the money would make it impossible for the authority “to pay recurrent bills — salaries, services and commodities that we buy from the private sector. It will have a direct impact on the whole economy, not just on employees,” he said.
Thousands of Palestinians would be unable to meet repayments on bank loans for houses, cars, furniture and other goods.
In the longer term, Palestine’s inability to pay bills would discourage foreign and private investors. “It impacts the dynamics of the economy and slows the economy,” said Abu Lideh. “It’s a chain cycle; the whole economy becomes less predictable and attractive to investment.”
The $100-million monthly sum comes from import duties levied by the authority but collected by Israel, which controls most of the access to the West Bank and Gaza. It amounts to around two-thirds of the Palestinian’s self-generated revenues, although Palestine also receives donor aid from the international community.
“This is a very explicitly regulated activity within the framework of the Oslo agreements. It is also a commercially-based arrangement in which Israel benefits,” said Abu Lideh. Israel deducts 3% of the monthly sum as a fee for collecting the taxes.
The PA took out bank loans at commercial rates of income to pay last month’s salaries and bills but it had reached the ceiling on the amount it is legally permitted to borrow.
Despite the hardship caused by the authority’s inability to pay salaries, Abu Lideh did not anticipate protests in the West Bank and Ramallah in the coming days.
“Palestinian people are wise enough and patriotic enough not to go to the streets tomorrow. But if people don’t get their salaries for a month or two months or three months?”
Who benefits?
Salam Fayyad, Palestine’s prime minister, warned last week that the Palestinian institutions were “advancing rapidly toward the point at which they will stop operating”.
Hillary Clinton, the US secretary of state, and other US officials last week demanded Israel release the money, a call echoed by the UN’s secretary general, Ban Ki-moon, and Blair. “Only those who oppose peace and Israeli-Palestinian cooperation benefit from the withholding of Palestinian funds,” Blair said in a statement.
According to Abu Lideh, such statements were ineffective. “The international community has to say ‘enough’, not in words but in deeds. Israel should be informed bluntly that if you continue your economic sanctions and collective punishment of the Palestinian side, measures could be taken.”
An Israeli official said its move was in response to “negative and irresponsible” behaviour by the Palestinians in violating both the spirit and the word of signed agreements with Israel.
“They can’t expect business as usual,” he said. But he added: “This is a temporary hold; no decision has been taken to stop the money on a permanent basis.” —