Israel to blame for Palestinian Authority's financial crisis, says PM Mohammad Mustafa

Europe to throw 'all its political capital' into pressuring Israel to release taxes

Palestinian Prime Minister Mohammad Mustafa with the European Commissioner for Mediterranean, Dubravka Suica, in Brussels. EPA

Israel is to blame for the Palestinian Authority's financial crisis, the Palestinian Prime Minister Mohammad Mustafa said on Thursday, following a donor conference in Brussels organised by the European Union to shore up support for the weakened body.

“We expect them to pay our money fully and quickly,” Mr Mustafa said. “If Israel followed the laws and the agreements signed, and paid our money, we would not need the support of anyone, hopefully, at least not at this level.”

Speaking alongside Mr Mustafa, the European Commissioner for the Mediterranean Dubravka Suica said that Europe is applying strong pressure on Israel to release billions of dollars in withheld taxes that threaten the continued delivery of services to Palestinians in the West Bank.

The EU, the top donor to the Palestinian Authority (PA), needs “further international support to stabilise the Palestinian fiscal situation”.

“We are really putting pressure on Israel. All our diplomatic energy, all our political capital is being invested in trying to push Israel to release these revenues,” Ms Suica said. “We know it's now mounting to €3 to €4 billion, which is big amount of money, and which is indispensable for a solid and stable Palestinian Authority.”

The EU had organised the first meeting of the Palestine Donor Group with some 60 state representatives to discuss the PA's reforms, in a bid to avoid it being sidelined in US President Donald Trump's peace plan for Gaza.

Far-right Israeli Finance Minister Bezalel Smotrich has withheld taxes collected on behalf of the PA since the October 7 attacks. Reuters

Turning to Mr Mustafa, Ms Suica said: “You are not alone in this endeavour.” But she also warned that “more work needs to be done on reforms”.

“It is essential that we remain firmly committed to this path with determination and in full transparency,” she said.

Mr Mustafa responded that the PA was pushing ahead with reforms and that they would take “two to two and a half years” to complete. However, he said that this would not be sustainable as long as Israel continues to withhold taxes, which the far-right Israeli Finance Minister Bezalel Smotrich has done since the Hamas-led October 7, 2023, attacks against Israel.

“Tax and VAT reforms are under way. Financial management is being digitised. Governance reform, including institutional mergers and merit-based appointments, are moving forward, and the education modernisation programme is already being implemented,” Mr Mustafa said.

“Let me be very clear here, no government can sustain reforms if it is denied its own revenue. The current fiscal crisis is politically motivated. Israel's withholding of Palestinian clearance revenue threatens salaries, service, continuity and stability in both Gaza and the West Bank.”

Europe views the PA, despite its weakened state, as the only viable option to Hamas to lead Gaza's reconstruction. Mr Mustafa pledged that the PA would do so. “We will govern, we will reform, and we will lead Gaza's recovery,” he said.