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Israeli Tax Freeze Cripples Palestinian economy
RAMALLAH - Mohammed Saadi
hasn’t gone to his job at the Palestinian Authority's Public Works and
Housing Ministry for a week now, “I pay seven dollars for transportation
each day, which means more than $125 from my $450 monthly salary is
being spent on that," he told The Media Line.
Saadi,
30, is one of the Palestinian public employees who haven’t been paid
their November salary yet due to a deep financial crisis facing the
government. Public Employee Union chief Bassam Zakarneh told the Media Line that salaries are already almost three weeks overdue.
Saadi,
a janitor and mail boy, doesn’t know whether the government will deduct
the week he stayed home from his salary. “I’m afraid if my 18-month
baby gets sick I won’t find the money to buy him medicine,” he said
despondently. “Although public employees and their families enjoy health
insurance, not all medicine is found in the hospitals as a result of
the crisis and austerity measures. “Sometimes they don’t even have the
basic analgesic drugs," he told The Media Line.
Responding
to a Palestinian Authority move to elevate its status to that of a
non-member observer state at the United Nations General Assembly decided
to withhold the estimated $100 million dollars a month of taxes and
customs revenues it collects on behalf of the Palestinian Authority for
the next four months and use it to pay the Israeli electricity and water
companies instead. That
sum is more than a third of the Palestinian Authority's (PA) monthly
revenues, “Cutting it means that the government is left with $50m.
locally collected from taxes”, Nasr Abd El-Karim, an economics
professor at Birzeit University, told The Media Line.
Prime
Minister Salam Fayyad this week called upon Palestinians to boycott
Israeli goods, the first time such a threat has been made from such a
high official, calling such a boycott a legitimate reaction to Israeli
"piracy"of Palestinian money. However, a widely circulated Facebook
cartoon pictured a Palestinian employee saying that "someone should tell
Fayyad that Palestinians don't have any money to buy goods" of any
kind.
Several thousand teachers organized a strike earlier this week in the northern West Bank city of Nablus
and the Public Employees Union decided to join and announce a general
strike -- excluding a part of the media and health sectors.
Before
the UN bid, the Arab League said it would provide a $100 million safety
net for Palestinians, but the money hasn’t come yet.
The
Palestinian Monetary Authority said local banks have agreed to grant a
short-term loan of $100 million to the PA until the promised Arab League
money is received. This amount is not expected to ease the crisis,
however, as the monthly government salaries bill itself is estimated at
$160 million.
Banks are less willing to lend to the government as debts of the PA increase, and amid talks of a PA collapse.
It
is expected that the PA will only pay a portion of the workers'
salaries, ranging between $400 and $1000 each. “This is only one quarter
of what the employees deserve and will mostly be spent on repaying the
loans they owe to the banks,” Zakarneh told The Media Line.
The
Palestinian Monetary Authority has stopped penalizing public sector
employees who had no money to pay their bills. As the largest work force
in the Palestinian territories, the public sector salaries are vital to
the vulnerable Palestinian economy.
An
accountant in a local information technology company told The Media
Line most of his clients are public employees. “We called the customers
and agreed on a way to reschedule their bills,” Faris Ali told The Media
Line.
So
far this year, the PA has accrued more than $1.2 billion in debt, a
yearly deficit that international donations used to cover. However, the
Arab and foreign donors reduced their aid in the past few years because
of what analysts say is the lack of a clear political solution to the
Palestinian-Israeli conflict.
However,
economics professor Abd El Karim blames the Palestinian government for a
lack of economic planning. He said the PA routinely gave cars to senior
officials and paid many of their personal expenses including phone
bills, gas bills and travel expenses.
However government spokesman Nour Odeh told The Media Line
that the government formulated its budget based on the promised pledges
as well as an estimated account of the tax money expected from Israel. “Israel
can’t just withhold the money because it feels like it, or some
officials have an elections campaign to run,” added Odeh, referring to Israel’s elections next month.
Abd El Karim said
that the Israeli “occupation” is responsible for decreasing potential
investments in the Palestinian territories, but the Palestinian split
between Hamas and the PA has also contributed to the crisis.
The
PA pays some of the Gaza Strip’s water, electricity, and gas bills as
well as the salaries of thousands of PA employees who haven't worked in
their ministries since Hamas took over the Gaza Strip in 2007. “On the
other hand, the government in Gaza refuses to give us the tax invoice so we can collect them from Israel” said Odeh.
Earlier
this year, Palestinians and investors revolted against a government
decision to raise income taxes, pressuring the government to postpone
it. Last September, the public transportation union succeeded in bringing West Bank
life to a standstill after it organized a strike protesting the
government’s decision to raise gas prices. Demonstrators protested the
high cost of living and demanded Fayyad's resignation.
However,
the current crisis will not be resolved by his resignation and an
increase in external aid that would only provide a short-term solution.
“The only way out of this problem is the Arab money," said Abd El Karim. "The
Qatari emir may decide to generously donate money to the Palestinians
the way he did when he visited the Gaza Strip,” he added, referring to
the Qatari prince's expected visit to the West Bank at the end of this month.
After
an immediate solution is found, Abd El Karim wants to see a change in
the government's economic policy it has followed since 2007. "Analysts
have been warning against this policy. I respect the intentions behind
it but we have to learn from the failure of the past five years,” he
told The Media Line.
In
the long run, it is unlikely that the Palestinian government will be
able to depend on external aid, bank loans and raising taxes.
In
a meeting with journalists last week, senior Fatah official Mohammed
Shtayyeh said that Palestinians will engage in a comprehensive economic
dialogue so all sectors can share the financial burden.
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Labels: Economy, Gaza, Israel, Palestinian Authority
posted by Pieface @ Sunday, December 23, 2012
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