The Palestinian Authority is facing one of the worst financial crises since its inception under the Oslo Accords in 1994, failing to cover the wage bill for its West Bank and Gaza Strip employees.
Palestinian Prime Minister Muhammad Shtayyeh attributed the cause of this crisis to Israel during the government session last week, saying: “Israel continues to deduct money from our debts, which puts us in a difficult financial situation.”
Shtayyeh’s government has been forced to reduce the salaries of its estimated 140,000 employees in the West Bank and Gaza by 25% compared to last November.
Experts and specialists tell Al Jazeera Net that the repeated power crises over the past two decades are due to two main reasons, namely the constraints of the Paris Economic Agreement, and the poor financial and economic performance of the government.
Paris Economic Agreement
The Paris Agreement is the common name for the economic protocol to the Oslo Accords, and was signed on April 29, 1994 by the Palestinian Authority and Israel in Paris.
The agreement consists of 82 articles with the aim of regulating economic relations by the “Joint Economic Committee” between the two parties during the 5 years of the transition phase of the Oslo Agreement, which actually ended in 1999. However, this committee only did so a few times, before it was completely frozen by Israel after the outbreak of Al-Aqsa Intifada in 2000.
Previous demands for the government to make amendments to some provisions of the agreement – more than a quarter of a century since its signing – have been greeted with an Israeli rejection.
A study by the General Union of Palestinian Economists entitled “The Palestinian Economy Victimized by the Paris Economic Agreement” described this agreement as a “trap” entered into by the Palestinian Liberation Organization due to the Palestinian negotiator’s lack of experience in economics, financial and technical issues, and so far it has not been able to escape this trap.
On the other hand, Israel made the final decision on everything related to Palestinian economic development, which was limited by the agreement with Israeli political, security and professional approvals.
According to the study, the joint economic committee between the two parties, composed of an equal number of members, and any other sub-committees that could be formed only changed a name and entered the “fridge”, and it no longer have any authority or influence over the overall economic, commercial and financial relations between the two sides.
Constraints and dependence on the Israeli economy
The journalist who specializes in economic affairs, Hamed Gad, told Al Jazeera Net that the agreement besieges the Palestinian economy and surrounds it with “a tight Israeli circle”, and prevents its launch into real development, due to the constraints of the agreement that linked it to the Israeli economy and made it extremely difficult to break away from it.
Under this agreement, Israel controls the smallest details of Palestinian economic life through its absolute control over ports and crossings, linking economic approvals to the security dimension, and within the unified customs envelope without regard to the level of growth and development in the emerging Palestinian economy compared to the Israeli one, according to Jad.
He added that the agreement places strict restrictions on the movement of exports and imports by stipulating that the Palestinian economy has nothing to do with countries that do not have political or commercial relations with Israel or are at war with it.
Gad added that the Palestinian trader was bound by requirements in terms of quantities and specifications, and the complexity of Israeli security clearances, so he was forced to trade directly with the Israeli economy to circumvent the complex requirements of external trade.
Jad believes that the Palestinian economy will not see real growth and progress in the presence of this agreement, and the lack of an environment that attracts investment, such as security and stability, and the lack of the Palestinian side that its commercial outlets with the outside has. world.
What is cleaning?
In addition to the impact of the restrictions of the agreement on the revival and growth of the economy, it is in an important aspect related to the offsetting (tax revenue) that it was the cause of the government’s repeated financial crises, as well as Israel’s use of the customs revenue funds it collects on behalf of the government as a “print card and political extortion”, and he intends to seize them. And not to transfer it to the Treasury of the Authority, even if he collects it in return 3% as collection and management fees.
The clean-up funds, estimated at about $ 188 million a month, include taxes levied by Israel on goods imported into the Palestinian Authority from abroad, 75% of the income taxes it collects from Palestinian workers working inside Israel. , and all taxes levied on Palestinian workers. in settlements, in addition to Other transaction fees.
Israel legalized the seizure of these funds in March 2018, when the Knesset passed a bill holding back amounts equal to the value of the financial grants the Government paid to the families of martyrs and prisoners.
In May of that year, the government responded by stopping security coordination and refusing to receive the incomplete clearance. However, it did not take long before he decided in November 2019 to resume security coordination, saying at the time that his decision came after Israel paid the full financial fees, estimated at 3 billion and 768 million shekels (one dollar equals 3, 10 shekels).
However, Shtayyeh’s recent statement confirms that Israel has not committed to, and continues to reduce, these funds, which has put the Government in a new and recurring financial crisis.
Specialists say the government can not afford financially without the clean-up funds, which accounted for about 68.4% of the government’s total revenue for fiscal year 2017, according to data from the Palestinian Ministry of Finance.
Causes and solutions
In turn, professor of economics, dr. Moeen Rajab, that most of the Palestinian tragedies and financial crises are due to the Paris Agreement, but at the same time he holds the authority – with his poor performance and poor performance – partly responsible.
Rajab told Al-Jazeera Net: “We are not with this agreement, but it exists, and the government has not improved its handling to the extent that it benefits the national economy.”
He agrees with proponents of the need to amend the agreement in line with developments 27 years after its signing. “It is not enough for the government to request the amendment, but rather to insist on the request and international forums press to force Israel. to do so. “
He added, “It is natural for Israel to refuse to make changes, as the agreement has guaranteed it a lot in exchange for the few crumbs it gives to the government.”
He wondered, “Is it reasonable, after all these years, for Israel to continue to draw up its terms and restrictions that guarantee it the provision of about 65% of the Palestinian market’s needs, while the percentage of Palestinian trade with Arab countries does not exceed 4.%? “