Palestinian Territories Face Serious Fiscal Crisis: World Bank

In a report issued on Tuesday, the World Bank said the economic situation in the Palestinian Territories would “likely worsen by the end of 2012,” and emphasized that, “only strong private sector investment will drive sustainable growth.”

The most major export from the Palestinian territories is cut stones, and the economies are heavily reliant on foreign aid. However the U.S. and many Arab donors have not met their 2012 donor pledges.

The slowdown in donor aid is part of the problem, as well as “higher-than expected expenditure” and “lower than anticipated revenue.” All in all, even assuming that all the appointed donors give the full amount pledged, the Palestinian Authority will be short about $400 million.

The Palestinian Authority’s budget for 2012 was $4 billion, according to ABC, about half of which is supposed to be paid to 150,000 Palestinian civil servants.

“Donors do need to act urgently in the face of a serious fiscal crisis facing the PA in the short term,” said Mariam Sherman, World Bank Country Director for the West Bank and Gaza in the release.

“But even with this financial support, sustainable economic growth cannot be achieved without a removal of the barriers preventing private sector development.”

The 60 percent of the West Bank that is under Israeli control, dubbed Area C, could hold the key to substantial private sector growth, but “restrictions put in place by the Government of Israel continue to stand in the way of potential private investment and remain the major impediment to sustainable economic growth,” the report said.