The Palestinian Authority on Friday welcomed foreign fund pledges it said would help it keep government services going while Israel withholds tax revenues it collects on the PA’s behalf.
Donor countries pledged at least $170 million to finance the budget of the Ramallah-based PA in New York on Thursday, according to PA Prime Minister Mohammad Mustafa’s office.
The announcement came as world leaders gathered for the UN General Assembly, with a recent string of recognitions of a Palestinian state by countries including France and Britain.
The PA had sought $400 million a month for six months, and the prime minister’s spokesman Mohammad Abu al-Rob told AFP it was unclear whether the pledged funds would be renewed.
A European diplomat told The Times of Israel last weekend that Saudi Arabia, France, Norway and Spain had agreed to donate $200 million a month to the PA for six months, but were hoping that other countries would help share the burden.
Saudi Arabia’s inclusion in the effort was particularly noteworthy, as Riyadh previously was one of PA President Mahmoud Abbas’s biggest critics, accusing him of corruption.
In the West Bank, services provided by the PA have deteriorated in recent months, with Israel stopping tax revenue transfers amounting to 68 percent of the authority’s budget, according to Abu al-Rob.
“Who can continue working while losing 60 percent? Which country can continue offering services?” he said.
Because of the cuts, schools in the West Bank opened late this year, and were still only opening three days a week, he added.
The cuts have also “reduced work to the lowest limit for emergency cases and operations,” while also hitting medicine stocks, he said.
Palestinians living in poverty were also affected, Abu al-Rob said, with their numbers rising by over 150 percent since the start of the Gaza war, and with cash assistance not paid out in over two months.
The Palestinian economy is largely governed by the 1994 Paris Protocol, which granted sole control over the territories’ borders to Israel, and with it the right to collect import duties and value-added tax for the PA.
Over the past five years, Israel has deducted around NIS 500 million ($150 million) annually from these revenues over controversial PA payments to families of slain terrorists, in a policy the Authority says it has since overturned.
Since the Hamas-led October 7, 2023, attack on Israel, which sparked a crackdown on terrorists in the West Bank, Israel has withheld additional PA revenues as well.
It no longer transfers the monthly sums the PA once directed to Gaza, including pensions for ex-employees who served under the PA, and payments for electricity and water supplied to the Strip. Those funds totaled some NIS 120 million (nearly $36 million) per month.
Far-right Finance Minister Bezalel Smotrich, who stopped all payments to the PA four months ago, has said he would pursue the collapse of the Palestinian government through “economic strangulation” to prevent the creation of a Palestinian state.
Beyond tax transfers, two other pressures are squeezing the Palestinian economy: Israel’s strict limits on the entry of Palestinian workers into Israel since Hamas’s October 7, 2023, attack, and a liquidity crisis with Israeli banks.
In a letter reported by the Times of Israel to potential donor countries last week, the effort’s four core nations — Saudi Arabia, France, Norway, and Spain — wrote that the Authority is facing an “existential threat” due to the withholding of the funds.
“A viable Palestinian state capable of fulfilling the needs and aspirations of the Palestinian people will be essential for a future of peace and security in the Middle East,” the letter said.
“We therefore need to urgently mobilize to prevent a financial collapse of the Palestinian Authority, with severe implications for Palestinian society, regional stability, and international security,” it continued.
“We need to act now, and with this objective, we propose to swiftly coordinate in the coming days an emergency coalition for Palestine,” the states wrote.