AP Interview: Palestinian PM warns of cash crisis

Published on NewsOK Modified: January 6, 2013 at 2:52 pm •  Published: January 6, 2013
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RAMALLAH, West Bank (AP) — The Palestinian self-rule government is in "extreme jeopardy" because of an unprecedented financial crisis, largely because Arab countries have failed to send hundreds of millions of dollars in promised aid, the Palestinian prime minister said Sunday.

The cash crunch has gradually worsened in recent years, and the Palestinian Authority now has reached the point of not being able to pay the salaries of about 150,000 government employees, Salam Fayyad told The Associated Press. The number of Palestinian poor is bound to quickly double to 50 percent of the population of roughly 4 million if the crisis continues, he said.

"The status quo is not sustainable," Fayyad said in an interview at his West Bank office.

The Palestinian Authority, set up two decades ago as part of interim peace deals with Israel, is on the "verge of being completely incapacitated," Fayyad warned. Only a year ago, he said he expected to make great strides in weaning his people off foreign aid.

The self-rule government was meant to be temporary and replaced by a state of Palestine, which was to be established through negotiations with Israel. However, those talks repeatedly broke down, and for the past four years the two sides have been unable to agree on the terms of renewing the negotiations.

In late November, Palestinian President Mahmoud Abbas won U.N. recognition of a state of Palestine in the West Bank, Gaza and east Jerusalem, overriding Israeli objections to the largely symbolic step. On Sunday, Abbas asked his West Bank-based government to prepare for replacing the words "Palestinian Authority" with "State of Palestine" in all public documents, including ID cards, driving licenses and passports.

Israeli officials declined comment, including on whether Israel would prevent Palestinians with new ID cards and passports from crossing borders and checkpoints.

The U.N. bid gave the Palestinians new diplomatic leverage by affirming the borders of a future state of Palestine in lands Israel captured in 1967, but changed little in the day-to-day lives of Palestinians.

In an apparent response to the U.N. move, Israel in December halted its monthly transfer of about $100 million in tax rebates it collects on behalf of the Palestinians. That sum amounts to about one-third of the monthly operating costs of the Palestinian Authority. Fayyad said he now only takes in about $50 million a month in revenues.

Israel has said it used the withheld money to settle Palestinian Authority debt to Israeli companies, and it's not clear whether the transfers will resume. In the meantime, the 22-nation Arab League has not kept a promise to make up for the funds Israel withholds, Fayyad said.

The head of the League has written to member states, urging them to pay the $100 million, Mohammed Sobeih, a league official, said Sunday.

Fayyad pinned most of the blame for the Palestinian Authority's financial troubles on delinquent Arab donors, saying they are "not fulfilling their pledge of support in accordance with Arab League resolutions."

European countries kept their aid commitments, he said.

Some $200 million in U.S. aid were held up by Congress last year, a sum the Obama administration hopes to deliver to the Palestinians this year, along with an additional $250 million in aid. "We have made it clear that we think the money should go forward," State Department spokeswoman Victoria Nuland said last week.