To Prevent PA From Collapsing, US Pressures Israel To Take Economic Measures
Continued reports warning of the Palestinian Authority’s looming economic collapse, prompt the US to press Israel on taking steps to prevent its demise and extend an economic lifeline to the Palestinian Authority under President Abbas
The PA is facing severe challenges to its economy, putting its sustainability as a viable political entity into question.
The collapse of the PA and the creation of a political vacuum is not in anyone’s interest, because it opens the way for chaos and situations with unimaginable consequences. I do not think that Israel is sincere or genuine about offering assistance, but US pressure leaves it with no choice but to take some steps to appease the Americans.
“No doubt the PA is going through a financial crisis, and this is not new, and talk of the PA’s bad economic situation is all-consuming, and comes up annually,” Dr. Nasr Abdel Kareem, professor of finance and economics in the Graduate Studies Department at the Arab American University in Ramallah, told The Media Line.
According to many analysts, this is the weakest period the PA has ever seen since its inception.
Abdel Kareem says that since its inception in 1993, the PA has been constantly facing economic hardships.
“The collapse of the PA and the creation of a political vacuum is not in anyone’s interest, because it opens the way for chaos and situations with unimaginable consequences. I do not think that Israel is sincere or genuine about offering assistance, but US pressure leaves it with no choice but to take some steps to appease the Americans,” says Abdel Kareem.
He points to the position of the Israeli government and its policy toward the Palestinians, and the position of the international community on the state of the economic and financial viability of the PA.
“For the Authority to collapse, and to reach the brink of bankruptcy, it is difficult even from a legal or political point of view. It may accumulate debt, but it will not collapse,” says Abdel Kareem.
Abdel Kareem says that donor countries have been slow in coming to the aid of the PA.
“It is clear that for the last six or seven years, aid from the international community to the Palestinians has been very scarce, even from our Arab brothers,” says Abdel Kareem.
Palestinian officials have described the Israeli measures as “propaganda” and lacking credibility.
In response to the news of Israeli cabinet discussions regarding possible steps to assist the PA economically, PLO Executive Committee Secretary-General Hussein Al-Sheikh said that the Israeli government is “a racist government that is trying to beautify its image with steps that do not go beyond throwing dust in people’s eyes.”
Al-Sheikh added, in a statement, that “the one that besieges the Authority and seeks to weaken and undermine it, is the government of Israel.”
A senior Palestinian official in Ramallah told The Media Line that the Israeli facilitation measures are in direct response to the request of the Biden Administration.
The official, who is privy to the situation, said that several steps are being discussed to ease the latest financial crisis.
Meanwhile, the Israeli security cabinet is debating a series of economic measures to bolster the PA, including easing the schedule of PA debt repayments to Israel, and the reinstatement of VIP permits for senior PA officials. Israel is also considering increasing the number of work permits issued to West Bank Palestinians to work in Israel.
The cabinet is also discussing the approval of a new industrial zone in Tarqumiyah, near the southern West Bank city of Hebron, a move long supported by Israeli security officials, and the extension of operating hours at the Allenby border crossing with Jordan.
The cabinet is also debating other steps, such as the revoking of a decision earlier this year to redirect PA tax revenues collected by Israel on its behalf, to families of Israeli terror victims, offsetting PA payments to families of Palestinian security prisoners.
Israel’s Finance Minister Bezalel Smotrich and National Security Minister Itamar Ben Gvir, from the far-right Religious Zionism and Otzma Yehudit parties, respectively, object to these steps.
In January, Smotrich signed an order to redirect $39.6 million in PA tax revenue, as part of punitive measures against the PA’s international legal action against Israel.
Abdel Kareem says that Israeli policy undermines the effectiveness of the PA, and weakens it, rendering it incapable of carrying out its duties.
“These steps [under discussion in Israel] will not be enabling the PA in the actual sense, nor will they empower it, and even if it does, it will be temporary and unsustainable. This will partially aid the Palestinian economy and its treasury. This is in the event that Israel adheres to the so-called facilitative measures, and doesn’t stop or suspend them again,” says Abdel Kareem.
This is an old story, nothing new at all. The Palestinian Authority is completely dependent on Israel.
These obstacles to the Palestinian economy, says Dr. Gil Feiler, an expert in Middle Eastern economies and senior researcher at Bar-Ilan University’s Begin-Sadat Center for Strategic Studies, is neither new nor surprising.
“This is an old story, nothing new at all. The Palestinian Authority is completely dependent on Israel,” Feiler told The Media Line.
“It will help greatly to increase the number of Palestinians working in Israel, we see signs in Gaza and in the West Bank as a result. The PA depends completely on the workers in Israel because they make double and sometimes triple the amount they would earn in the Palestinian territories.”
However, Feiler maintains that the escalating violence between Israelis and Palestinians will negatively impact the financial situation of the latter.
Feiler emphasizes that the Israeli government needs to be more committed to helping the Palestinians have a robust economy.
“Unfortunately, these steps won’t help the Palestinian economy long term. Because it’s not the economic issue, but also the political issue,” Feiler adds that for the Palestinians to have a vibrant economy it will benefit Israel too, “but the extremists on both sides, especially on the Palestinian side, dictate the behavior of the population.”
“What will happen when there’s a terror attack? All these measures will be suspended again,” says Feiler.
He says with the sharp decrease in international aid, including funds from wealthy Arab countries in the Gulf, leaves the PA with limited resources.
“The main source for the Palestinian treasury is workers in Israel and the remittances they send back, and the tax money Israel collects on behalf of the PA, and if any of these are interrupted, it will spell doom for the Palestinians,” says Feiler.
Considering declaring bankruptcy due to its dire financial situation is not an option, says Abdel Kareem, adding that ensuring the financial viability of the PA is a top priority for many regional and international actors.
The US and Israel are extremely worried about the stability of the PA, especially President Biden as he tries to broker a normalization deal between Israel and Saudi Arabia.
The PA was hit hard in 2017, when former US President Donald Trump cut off nearly all US aid to Palestinians. However, his successor, President Joe Biden, has reinstated some of the funding, but US laws now outlaw direct aid to the PA.
In 2018 the US Congress passed the Taylor Force Act, which prohibits US funding from directly benefiting the PA, as a measure against its security prisoner and martyr payments policy.
Abdel Kareem says the future looks bleak over the lack of a long-term solution.
“In the absence of a horizon for a political solution, and a solid economic plan, of course there will be economic difficulties, especially since its economy is currently linked to the Israeli economy.”
Palestinians say that Israel responded reluctantly to the American demands.
“The Biden Administration has failed to achieve any political breakthrough between the Palestinians and the Israelis, despite all the promises Biden made before his election, and therefore he wants to enter through the economic gateway, and this is what Trump tried to do,” says Abdel Kareem.
