UN warns of dire economic future for Palestinians

Tor Wennesland says Palestinian Authority's fiscal situation has not improved

Palestinians walk by closed shops during a general strike. AP

Worsening violence, a lack of reform and the absence of a peace process are all undermining the Palestinian economy, a UN report warned on Tuesday.

It also noted that without an “immediate” strategic shift, there could be a “serious reversal” in the Palestinian state-building project.

Report author Tor Wennesland, UN Special Co-ordinator for the Middle East Peace Process, said the negative trends not only contribute to a “pervasive sense of pessimism regarding a political solution to the conflict and negatively impact the Palestinian economy, but they also undermine efforts to strengthen the PA [Palestinian Authority] and create space for the Palestinian economy to grow”.

Mr Wennesland warned that with declining donor support, the ability of UN agencies to keep pace with growing needs is under threat.

“Given current demographic trends, needs are expected to increase exponentially in the medium term, making immediate investment in basic service delivery necessary,” he said.

Pressures on the Palestinian economy resulting from Israeli restrictions need to be relieved and both sides need to engage in “real efforts to address imbalances in their economic and administrative relationship”, he added.

He also called on Israel to further ease restrictions on the movement of goods in and out of Gaza to maximise the positive effect on the Palestinian economy.

The report noted that despite limited implementation of reform measures, the fiscal situation of the Palestinian Authority has not improved. It called for increased revenue collection and more efficient public spending.

Palestinian Prime Minister Mohammad Shtayyeh told his cabinet on Tuesday that the government would pursue reforms but did not offer specifics.

He said Israel's policy of withholding some tax income and a dip in foreign donations have added to the budget deficit.

Israel routinely withholds tax revenue from the PA, claiming it is in response to payments made to families of Palestinians killed by Israeli forces or during attacks on Israelis.

As part of past peace accords, Israel collects taxes and customs revenue on the PA's behalf.

Mr Wennesland's report coincided with another report by the World Bank that warned the Palestinian economy would slump this year amid increased tension in its territories and the effects of Russia's ongoing invasion of Ukraine.