The Palestinian Authority (PA) is facing a budget crisis after receiving only one half of the foreign donations it expected in 2016, Reuters reported.
“We had expected to get $1.2 billion in [foreign] support and offers but we have only received $640 million so far,” PA Prime Minister Rami Al-Hamdallah told the Al-Quds newspaper Tuesday.
The PA revealed in a cabinet meeting that it is expected to run up a budget deficit of over $1 billion, or 15% of its gross domestic product (GDP), in 2017, due to the shortfall in foreign aid. The US budget deficit was 3.2% of its GDP in fiscal year 2016.
Several Arab states have recently cut their financial support for the PA. Saudi Arabia, which regularly donated $20 million towards the annual PA budget, halted its donations last April in order to pressure PA President Mahmoud Abbas to initiate political reforms.
The EU and the US also reduced their support for the PA budget in 2016, instead directing their funding towards specific programs to aid the Palestinian Arabs.
The PA Cabinet issued a statement saying that spending would have to be cut across the board in 2017 to make up for the reduced foreign aid.
“Such a decline compels us to adopt an austerity policy in all fields.”
No details on the nature of the expected cuts were given. More than half of the PA budget, 55%, goes towards the salaries of PA employees.
The PA spends millions of dollars each month paying salaries to terrorists in Israeli prisons and their families through the PLO. Payments towards the salaries of terrorists accounted for 6% of the PA’s budget before it shifted responsibility for the payments to the PLO in 2014 to placate western donors critical of the practice.