Palestinians fear recent aid cuts could expand

After Australia decided to cut direct aid to the Palestinian Authority, officials are concerned other countries could follow suit.

al-monitor A Palestinian boy cries as students of United Nations-run schools take part in a protest against a US decision to cut aid, Khan Yunis, southern Gaza Strip, Feb. 27, 2018. Photo by REUTERS/Ibraheem Abu Mustafa.

Jul 8, 2018

GAZA CITY, Gaza Strip — The Australian government announced July 2 its decision to cut direct financial aid to the Palestinian Authority (PA), citing fears that the funds are paid as monthly salaries to Palestinian nationals convicted of carrying out attacks against Israel. The decision is another challenge to the PA, which is already suffering from a steady decline in foreign funding and an estimated budgetary deficit of around $1 billion this year.

Australia’s Foreign Affairs Minister Julie Bishop said in a statement that her government will cut funding to the PA of some $10 million paid annually, currently distributed through the World Bank's Multi-Donor Trust Fund for the Palestinian Recovery and Development Program. The funds will instead be transferred to the United Nations Office for the Coordination of Humanitarian Affairs in the occupied Palestinian Territories, which provides health, food, water, sanitation and shelter services to those in need, she explained.

“I wrote to the [PA] on May 29 to seek clear assurance that Australian funding is not being used to assist Palestinians convicted of politically motivated violence,” she said.

Bishop expressed concern that Australian funds might be used to sponsor “activities that Australia would never support,” adding that she was “confident” the country’s previous financial contributions to the PA were used appropriately.

“The Australian government has informed the PA and the World Bank of our decision,” she stated.

Australia’s move coincides with the Israeli Knesset’s passing on July 2 of a law that will deduct the payments made by the PA to families of political prisoners and those killed or wounded by Israeli forces from the taxes Israel currently collects as contributions to the PA — a sum of around $300 million per year. The funds cut under the new law will be channeled into a compensation fund for Israelis killed in Palestinian operations.

In a similar decision against the PA, US President Donald Trump in March signed into law the Taylor Force Act, which prevents the State Department from paying some $300 million in aid to the PA because of the stipends paid for families of Palestinian “martyrs” and political prisoners.

Member of the PLO Executive Committee Ahmed Majdalani told Al-Monitor, “Australia’s decision is just a repeat of the US decision. It shows Australia's submission to negative US positions toward the Palestinians and echoes Israeli pressure on the Palestinian leadership.”

Majdalani explained, “This chimes with the US’ continued attempts to put the PA under an economic blockade by reducing foreign funding under the pretext that it pays salaries to prisoners. But the real reason is the PA’s rejection of future US-sponsored peace talks with Israel following Trump’s decision in December 2017 to recognize Jerusalem as the capital of Israel.”

In relation to the impact of Australia’s aid cuts on the PA’s budget, Majdalani noted that the withdrawal of external finances is not new, with funding having declined by 70% compared to 2010.

“Australian support is not significant enough to have a tangible negative impact on the Palestinian economy when cut,” he said. “But regardless of the size of the support, what concerns us are the political dimensions of the decision, which are graver than the financial aspects. A decision such as this may encourage other countries to cut off support for the PA in line with the US position, which will have greater significance for the Palestinian fiscal deficit.”

In a statement issued Feb. 27, the Palestinian government announced that this year's budget is worth a total of $5.8 billion. Revenues were estimated at $4 billion, in addition to foreign funding of $775 million, producing an annual fiscal deficit of $1 billion.

Economic analyst Adel Samara, the editor-in-chief of Kanaan news site in Ramallah, considers that Australia’s recent actions “were taken in coordination with the US and Israel as part of a plan to besiege the PA economically.”

Samara expects more nations and international institutions that provide assistance to the PA, such as the European Union, to take similar action under US pressure under the pretext that the funds are paid to Palestinian prisoners convicted of conducting attacks against Israel.

Palestinian Ambassador to Malaysia Anwar al-Agha said Jan. 5 in statements to Malaysian National News Agency BERNAMA, carried by local papers, “Palestine does not only rely on US aid, as it receives aid from other countries,” referring to the EU and Asian countries like Japan and China.

The United States provides the largest share of direct financial aid to the PA, amounting to about $350 million annually, followed by the EU, which offered this year some 158 million euros (around $186 million).

Donor countries started providing financial assistance to the PA after an international donor conference was held in 1993 in Washington. The conference aimed at helping the PA manage the Palestinian areas under the Oslo Accords. The donor conference resulted in the formation of a group of international donors made up of 15 members and headed by Norway. Among the members of said group are the United States, the EU and the World Bank. This group meets once a year on a ministerial level. The latest meeting was held in January in Brussels, where it pledged more than 42 million euros (around $49 million) in assistance to the Palestinians.

Samara told Al-Monitor, “The PA relies on revenue from two main sources: cleared funds and foreign financing. But what is happening is that Israel is attempting to deduct as much from cleared funds as possible through various pretexts, while the US tries to reduce foreign support for the PA wherever possible.”

The blockade effectively began following the PA’s rejection of US sponsorship for any future peace talks with Israel due to the United States removing the issue of Jerusalem from the negotiating table, according to Samara. It appears the aim of the blockade is to punish the PA for its decision, he added.

As Samara noted, the PA has dealt with the decline in foreign funding by reducing the monthly salaries of its employees in Gaza by 50%, while adopting new tax measures to address the budgetary deficit. “A further reduction in foreign funds would push the PA to more cuts to salaries and other new taxes, so the price will be paid by the people,” he explained.

Mohsen Abu Ramadan, a political and economic analyst who previously served as head of the Palestinian Non-Governmental Organizations Network in Gaza, told Al-Monitor, “The PA is experiencing the worst scenario since its inception, with US efforts to drain its sources of funding.”

According to Abu Ramadan, the alternative to offsetting the loss in foreign funds is to activate the Arab safety net, which was established during the March 2015 Arab Summit in Sharm el-Sheikh, Egypt, and which aims to provide $100 million per month to the PA from Arab donations.

“Despite the Arab decision to give fiscal support to the PA through this safety net, the Arabs are not committed to supporting the PA,” he noted. “Many Arab countries have completely cut off their support for the PA, such as the UAE and Saudi Arabia, due to their deteriorating ties.”

Faced with a continuing decline in foreign funding and the Arab states’ lack of commitment to their financial obligations, Samara believes the only choice remaining for the PA is to “immediately dissolve itself and transfer all its responsibilities to the occupying Israeli powers. It is those authorities who must take responsibility for their continued occupation of our Palestinian territories through ensuring food, electricity and the payment of employees’ salaries, as was the case before the establishment of the PA.”

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