What’s the holdup on passing 2019 Palestinian budget?

The Palestinian government has yet to approve the 2019 general budget two weeks before a deadline extension expires and is now working on a new emergency budget that accounts for Israel withholding tax revenues.

al-monitor Palestinian Finance Minister Shukri Bishara gestures during a news conference in Ramallah, in the Israeli-occupied West Bank, Feb. 21, 2019. Photo by REUTERS/Mohamad Torokman.

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palestinian government, budget, taxes, israeli occupation, palestinian budget, palestinian authority

Mar 18, 2019

GAZA CITY, Gaza Strip — Palestinian President Mahmoud Abbas' cabinet is down to the wire once again as its extended deadline to submit a 2019 general budget draws near.

Under Palestinian law, the Council of Ministers should have submitted a draft general budget to the Palestinian Legislative Council (PLC) at least two months before the beginning of the next fiscal year, which is the same as the calendar year. However, the law does provide for a three-month extension if necessary.

When Dec. 31 came and went, officials received the extension, which expires March 31. Almost three months into 2019, the government has discussed the budget only twice, on Feb. 12 and March 12. At the March meeting, the cabinet deferred any action to an undefined future session.

The failure to approve the 2019 budget can supposedly be attributed to two reasons. The Palestinian consensus government resigned Jan. 29 so a new government can be formed (though it has stayed on in the interim), and Israel decided Feb. 17 to deduct around 502 million shekels ($138 million) of Palestinian customs revenues. Israel claims the deducted amount is equivalent to the amount paid by the PLO in 2018 as stipends for Palestinian prisoners in Israeli jails and the families of Palestinian victims killed or wounded in confrontations with Israel.

The revenues are taxes on Palestinian imports collected by Israel on behalf of the PA, a monthly 670 million to 700 million shekels ($185 million to $188 million). The revenues account for almost 70% of the Palestinian government’s income. The PA uses those funds to pay on average about 556 million shekels (around $154 million) in monthly salaries to more than 180,000 public employees.

But Palestinian civil society organizations say the failure to draft a budget on time is unjustified and has stirred a wave of criticism against the government. 

Lamis Faraj, coordinator of the Civil Society Team for Enhancing Public Budget Transparency, told Al-Monitor, “Regardless of Israel's deduction of revenues, nothing justifies the delay by the Palestinian government in preparing the draft general budget for 2019.” Faraj pointed out that the budget should have been drafted and discussed in October, before the government resigned and Israel began deducting customs revenues.

Palestinian Finance Minister Shukri Bishara said at a March 10 press conference in Ramallah that the ministry had drafted a preliminary budget according to 2018 data but is now operating under an emergency budget.

Bishara added that on March 9, Abbas met with Fatah Vice President Mahmoud al-Aloul as well as Saeb Erekat, secretary-general of the PLO Executive Committee; intelligence chief Majid Faraj; Palestinian Authority Minister of Civil Affairs Hussein al-Sheikh; Minister of Foreign Affairs Riyad al-Maliki; and Deputy Prime Minister Ziad Abu Amr. Bishara said Abbas agreed to a budget based on rationing.

An official at the Finance Ministry who spoke with Al-Monitor on condition of anonymity confirmed the ministry has drafted a 2019 general budget that the government is expected to approve soon. However, even if approved, the budget won't be implemented in light of the emergency financial situation since Israel's deduction of customs funds and the decline of foreign financial support, he said.

The official also confirmed that the ministry is currently working on an emergency budget based on rationing and reducing expenses. “This means halting appointments and promotions in public service, halting acquisition of real estate properties and the replacement of old government cars with new ones,” he said. “This budget will remain applicable until the revenue-deduction crisis is resolved. Only then will an approved 2019 budget apply.”

Azmi Shuaibi, a consultant to the board of directors of the Coalition for Integrity and Accountability (AMAN), told Al-Monitor that the government's excuses for its failing to approve the 2019 budget are weak. The government has been violating the law for years by not submitting budgets on time, he noted.

According to Shuaibi, AMAN has endeavored since the beginning of the year to obtain a copy of the draft budget, but has failed amid strict instructions by Bishara not to leak anything related to the budget.

“We will find the right way to get the draft budget or the emergency budget. We will request the Civil Society Team for Enhancing Public Budget Transparency, composed of 55 Palestinian nongovernmental organizations, to discuss it and give its opinion," Shuaibi said.

The budget controversy was really no surprise in light of economic predictions for 2019. The Palestinian Central Bureau of Statistics reported in December that gross domestic product growth slowed by 0.7% in 2018.

The report expects a 1% increase in government revenues, but also a 1% increase of expenses and a 1.3% rise in the budget deficit. 

Osama Nofal, director general of studies and planning at the National Economy Ministry in the Gaza Strip, told Al-Monitor he predicts the next Palestinian government will seek to overcome the fiscal deficit by cutting spending in the public sector, raising local taxes and forcing thousands of employees into early retirement in the West Bank, as has happened in the Gaza Strip over the past two years.

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