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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The Palestinian Authority has relied heavily on foreign aid since the outbreak of the second Palestinian uprising in 2000. It has received hundreds of millions of dollars each year since then, but has struggled to wean itself off foreign support, in part because harsh Israeli restrictions on Palestinian trade and movement have hurt economic growth.

Only a year ago, Fayyad said he hoped to increase local revenues, including through spending cuts and higher taxes for wealthier Palestinians. He even set 2013 as a target for financing the government's day-to-day operations with local revenues. However, his tax plan was met by widespread protests and modest economic growth slowed.

Now he's not even sure how he will cover the government payroll, his heftiest monthly budget item.

The Palestinian Authority employs some 150,000 people, including civil servants and members of the security forces. About 60,000 live in Gaza and served under Abbas before the Hamas takeover, but continue to draw salaries even though they've since been replaced by Hamas loyalists.

In recent months, the government has paid salaries in installments.

Fayyad said he managed to pay half the November salaries by getting another bank loan, using as collateral Arab League promises of future support. He said he can't pay the rest of the November salaries, let alone start thinking about December wages.

The Palestinian Authority already owes local banks more than $1.3 billion and can't get more loans. It also owes hundreds of millions of dollars to private businesses, including suppliers to hospitals, some of whom have stopped doing business with the government.

The crisis "has put us in extreme jeopardy," Fayyad said.

The malaise has sparked growing protests. Civil servants have held warning strikes. On Sunday, their union called for four days of strikes over the next two weeks.

Walid Abu Muhsin, a government employee who makes 4,000 shekels ($1,000) a month, said he received only $500 in November, and his bank deducted 50 percent of that for car and home loans, leaving the father of three with $250 to live on.

"I am spending from the few savings I have," he said.

Fayyad said he's thought about quitting, but won't leave during a crisis. He was appointed by Abbas in 2007, after the Islamic militant Hamas seized Gaza by force. Hamas has received money from Iran, while Qatar last year pledged some $400 million for housing projects in Gaza.

Repeated attempts to heal the Palestinian rift have failed. Meanwhile, recent surveys suggest support for Hamas is on the rise, in part because it extracted what were perceived as Israeli concessions after a round of heavy cross-border fighting late last year.

The failure of the Palestinian Authority to deliver on many of its promises, Fayyad said, "has produced a reality of a doctrinal win" for Hamas.

He said the international community must decide whether it wants the Palestinian Authority, once seen as key to any Mideast peace deal, to survive.

"A weak Palestinian Authority cannot be an effective player if you are all the time preoccupied with making ends meet," he said.

___

Associated Press writers Aya Batrawy in Cairo and Ibrahim Barzak in Gaza City, Gaza, contributed to this report.

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