World Bank warns of $760m. Palestinian Authority funding deficit in 2020
Despite the COVID-19 pandemic, the PA could be forced to cut basic services, including medical ones, unless it found a way to make up the shortfall.
By TOVAH LAZAROFFA participant stands near a logo of World Bank at the International Monetary Fund - World Bank Annual Meeting 2018(photo credit: REUTERS/JOHANNES P. CHRISTO)
The World Bank has projected a $760 million deficit for the Palestinian Authority in 2020, even with the financial boost it received from the transfer of tax revenues Israel had collected on its behalf.The bank warned that despite the COVID-19 pandemic, the PA could be forced to cut basic services, including medical ones, unless it could find a way to make up the shortfall.Such spending cuts could impact basic service delivery “resulting in a much deeper economic contraction... with severe negative social consequences for the Palestinian people,” the bank said in a report it published Tuesday.“Lack of additional financing could also force the PA to scale back medical and social expenditures in response to the crisis, thereby increasing the hardships,” the bank wrote.It added that the deficit would also slow the PA’s economic recovery from COVID-19 and “raise broader security and operational challenges.”The bank said that the PA economy was already in crisis when the COVID-19 pandemic broke out in early 2020, following three years of low economic growth, high unemployment and deficits.Palestinian unemployment in the West Bank and Gaza was at 28.8% in the third quarter of this year, the bank stated.The coronavirus slowed the economy even further and the situation was made worse by the PA decision not to accept the tax revenues Israel had held on its behalf, amounting to $890 million. The PA made that move in the spring to protest pending Israeli annexation plans.Earlier this month, in the aftermath of the US election victory of Joe Biden, the PA opted to receive the funding, a move that improved a situation in which their deficit was expected to reach upwards of $1.5 billion, but did not end the crisis.The World Bank made a number of recommendations including a call for increased donor funding. It noted that funding to the PA this year amounted to $470 million down from $1.2 billion a decade ago.
In addition, it called on Israel to help make up the gap as well as to ensure a prompt and easy transfer of future tax revenue collections.“Given the role that clearance revenues could play as a potential stabilizer for the Palestinian economy, ensuring their uninterrupted flow is a key prerequisite for reducing volatility and maintaining economic stability going forward,” the bank said.Reforms could also be implemented to improve tax collection, a move that would provide additional revenues to the PA. This includes collection at the commercial crossing at Kerem Shalom, where the PA has been unable to claim VAT on the majority of imports, the bank said.
