World Bank approves grants worth $37m to support Palestinian reforms and social services

One grant will cover the green economy, while another will help to support online employment opportunities

The Palestinian economy grew 7.1 per cent last year, after shrinking 11.3 per cent in 2020, World Bank data shows, but many people remain in poverty. AFP

The World Bank has approved $37 million in grants for Palestine, which will support reforms and social services as its fragile economy, already battered by the pandemic, faces a dire fiscal outlook.

A $30m grant will cover reforms in the areas of transparency, inclusion and the green economy in the Palestinian territories, while a second disbursement of $7m will fund selected social services, provide short-term cash for services and support online employment opportunities for the most vulnerable populations in Gaza.

"The World Bank’s financial support through a new development policy grant builds upon previous operations and supports a range of reforms to strengthen governance and transparency efforts,” said Kanthan Shankar, World Bank country director for West Bank and Gaza.

“The grant will help ease some of the fiscal stress, while also focusing on strategic priorities in line with the World Bank Group’s Assistance Strategy for the West Bank and Gaza and the Palestinian National Development Plan for 2021-2023.”

The outlook for the Palestinian economy remains "precarious" and efforts are needed to place it on a sustainable trajectory, the Washington-based fund said in a report in May.

Despite signs of recovery after the easing of Covid-related measures, the fiscal situation remains highly challenging due to an accumulation of arrears and low volumes of aid, it said. In addition, the pandemic led to the emergence of newly poor Palestinians and an increase in vulnerability to food insecurity.

At the peak of the lockdown and economic restrictions, about 110,000 more Palestinians were pushed into poverty, World Bank data shows. Concentrated in the rural areas of the West Bank, they were more likely to be living in female-headed households. With 20 per cent of previously employed main income earners losing their jobs, income fell in more than 60 per cent of Palestinian households at the height of the pandemic.

The Palestinian economy grew 7.1 per cent in 2021, after shrinking 11.3 per cent in 2020, World Bank data shows. However, the size of the fiscal deficit (before aid) was $1.26 billion, while aid hit a record low of only $317m in 2021. As a result, the Palestinian Authority had to rely on domestic resources to finance its needs.

The World Bank's new operation to support inclusiveness and the green economy, as part of the Development Policy Grant, focuses on reforms to improve public procurement and increase transparency, it said on Wednesday.

This will promote stronger controls over spending, creating opportunities for productive investments and higher social spending.

The grant also supports the Palestinian Authority’s efforts to meet the needs of vulnerable groups through reforms that enhance financial inclusion, as well as to carry out gender-responsive budgeting in key ministries, it said.

The operation focuses on strengthening the Palestinian territories’ adaptation and resilience to climate change shocks through reforms to improve governance in the water sector and amendments to the environment protection law to reduce greenhouse gas emissions, the lender said.

The World Bank is also focused on the shortage of jobs, especially among young people in Gaza after years of political instability.

A Palestinian youth flashes the victory sign while standing near a flying Palestinian flag in the town of Beita. AFP/File

"The $7m grant will help create jobs in much-needed social services sectors, thus boosting human capital while helping young jobseekers and their families to lift themselves out of poverty,” said Mr Shankar.

The Gaza Emergency Support for Social Services project responds to the immediate needs arising from the emergency in Gaza and builds on previous operations to provide mental health services, short-term cash for social services and online employment opportunities.

The project will be carried out by the NGO Development Centre (NDC), which will select non-governmental organisations in Gaza to manage and scale up mental health and psychosocial services.

The NDC will also subcontract service providers to deliver training and support needed for youth to find employment opportunities as online freelancers.