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Palestinian Authority unable to pay salaries, even as it pursues statehood

The Palestinian drive for non-member state status at the UN could trigger Israeli economic retaliation that would end the viability of the Palestinian Authority.

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While Palestinians prepare for an upgrade to non-member state status at the UN late this month, small businesses in the occupied West Bank are sliding towards the abyss due to a fiscal crisis that economists say threatens the very existence of the Palestinian Authority.

As a result of a dramatic drop off in foreign donor funding, the authority has been failing to pay on time in recent months its 170,000 employees, whose salaries directly support about a quarter of the West Bank and Gaza Strip population. And sometimes, as happened when October salaries were finally disbursed Sunday, the PA makes only partial salary payments.

Economic hardship in the Palestinian areas, where growth is subject to the vagaries of the ongoing conflict with Israel and the vicissitudes of Israeli strictures on movement of people and goods, is nothing new. But now the PA salaries, which previously formed the safety net, have become uncertain and economists warn the shortfalls could stoke social instability. 

''The salaries are the most important single factor deciding the level of poverty.They are like a monthly blood transfusion to our economic body,'' explains Hisham Awartani, an economist at An-Najah University in Nablus.

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