Israeli tax freeze chokes Palestinian economy

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 said.
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 said.
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 $ 50 million. locally collected from taxes”, Nasr Abd El-Karim, an economics professor at Birzeit University, said.
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 $ 1,000 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 said.
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 said most of his clients are public employees. “We called the customers and agreed on a way to reschedule their bills,” Faris Ali told said.
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 said 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.