Israel to pay $100m it owes to Palestinian Authority

Israel had brought the Palestinian economy to its knees after refusing to pay the monthly tax revenues on behalf of Palestinians shortly after they won an upgrade in UN status. Hugh Naylor reports from Ramallah

RAMALLAH // Israel announced yesterday it would pay US$100 million (Dh367m) owed to the Palestinian Authority, billing it as a "one-time" response to a Palestinian economy struck by falling foreign aid and Israeli obstacles.

Israel stopped delivering the monthly tax revenues it collects on behalf of the Palestinians shortly after they won an upgrade in status to non-member observer state at the United Nations in November. The retaliatory move has forced the PA to suspend or pay only partial salaries to its 150,000 employees, bringing the Palestinian economy to its knees.

"Due to the financial situation of the PA, the prime minister authorised, in coordination with the finance ministry, the transfer to the PA on a one-time basis, tax revenues of the previous month totalling [US$]100 million," the office of Benjamin Netanyahu, the prime minister, said.

The statement did not make clear whether Israel would release the rest of the Palestinian tax revenue or continue withholding it in future.

The money represents only part of the amount Israel owes the PA, which earns about $100m a month in duties that are collected by Israel under interim peace arrangements reached in the 1990s. The total Israel amount ISrael is supposed to have handed over to the PA since November is $300m

Israel, which occupies the West Bank as well as the Gaza Strip and east Jerusalem, used December's tax collection to pay down a bill of about $200m owed by the Palestinians to the Israel Electricity Corporation.

Yesterday's decision follows a setback to Mr Netanyahu's right-wing Likud-Beiteinu alliance in this month's parliamentary elections, which saw a rise in seats for centrist parties.

Palestinian officials dismissed the gesture, however, describing Israel's withholding of PA tax money as "piracy" and the amount to be handed over as insufficient to reverse the economy's slide.

A PA official, speaking on condition of anonymity, criticised the move, saying that "to paint a picture of this being assistance to the PA just adds insult to injury because the Israelis have assaulted the livelihood of over a million Palestinians and undermined their institutions, almost to the brink of collapse".

Due to salary-payment disruptions, Palestinian unions have staged strikes halting public transport and schooling. Many Palestinians scrimp by shutting off heating in homes and businesses despite frigid winter temperatures.

Earlier this month, Salam Fayyad, the PA prime minister, called on Arab states to fulfil aid pledges, warning that his government's institutions had become almost "completely incapacitated".

"The financing problem that we've had in the last few years is solely due to some Arab donors not fulfilling their pledge of support in accordance with Arab League resolutions," Mr Fayyad said, adding that European countries had met their aid commitments.

Despite competing for aid with other countries in the region rattled by Arab Spring revolts, the Palestinians recently received $100m from Saudi Arabia. Mr Fayyad also said the United States had honoured all but $200m of US aid, which is held up in Congress because of the Palestinian upgrade in the UN.

Foreign aid received by the PA has dropped from $1.8 billion in 2008 to about $600m last year, forcing it to borrow from local banks, to which it now owes about $1.3bn.

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