First, the good news. Israel is about to transfer NIS1.8 billion ($515 million) to the Palestinian Authority (PA), part of the duties and taxes it has collected for the Palestinians. The two sides hope this will end the crisis stemming from Israel’s decision this past February to withhold some of those funds in a bid to prevent the PA from disbursing regular stipends to Palestinian inmates jailed in Israel and to their families and to former prisoners.
Until now, Palestinian President Mahmoud Abbas had refused to accept any of the funds, insisting that Israel transfer all the money due to the PA or none at all. The bad news is that the fund transfer is like prescribing an aspirin to cure a cancer patient. Israel freezing the tax revenues is only one cause, and not the chief one, of the severe chronic illness afflicting the Palestinian economy.
The illness stems mainly from the sharp decline in overseas donor funding to the PA (from $1.23 billion in 2013 to $516 million in 2018), the cutoff of US funding for UNRWA (UN Relief and Works Agency) to provide humanitarian assistance to Palestinian refugees, and the limits Israel imposes on the free movement of Palestinians in the West Bank and Gaza. Avichai Snir, an economist at Bar-Ilan University and the Netanya Academic College, told Al-Monitor that transferring the tax money would shrink the decline in per capita gross domestic product from 2% to 1%. Also according to Snir, an expert on the economy of the occupied territories, since the PA's departments account for a significant portion of the Palestinian economy, the increase in its debt is hampering private sector growth. As a result, unemployment stands at almost 18% and is much higher among younger Palestinians.
“Every increase in unemployment will have severe repercussions,” Snir warned. “We are not very far from the stage at which the straw breaks the camel’s back.” This, he added, is why Abbas decided to accept the money even though Israel continues to withhold funds. “He has no choice,” Snir explained. “His budget deficit is simply too deep.” Even after Israel transfers the funds, this year will still not be a good one for the average Palestinian.
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