Palestinian PM blames cash crisis on lack of Arab aid

The Palestinian government is close to being 'completely incapacitated; largely because Arab countries have not delivered hundreds of millions of dollars in promised aid, PM says.

Palestinian Prime Minister Salam Fayyad gestures during an interview with The Associated Press in the West Bank city of Ramallah, Sunday, Jan. 6, 2013. Fayyad is blaming Arab countries that havenít deShow more

RAMALLAH, West Bank // The Palestinian self-rule government is close to being "completely incapacitated" largely because Arab countries have not delivered hundreds of millions of dollars in promised aid, the Palestinian prime minister said in an interview yesterday.

If allowed to continue, the Palestinian Authority's unprecedented financial crisis will quickly double the number of Palestinian poor to 50 per cent of a population of about 4 million, Salam Fayyad said.

Mr Fayyad said the malaise is further boosting the political appeal of the Islamic militant Hamas while discrediting him and other proponents of a nonviolent path to statehood in the West Bank, Gaza Strip and east Jerusalem. Hamas seized Gaza from Mr Fayyad's boss, Palestinian president Mahmoud Abbas, in a 2007 takeover, leaving Mr Abbas with only the West Bank.

The failure of the West Bank-based Palestinian Authority to deliver on many of its promises, coupled with recent Israeli concessions to Hamas, "has produced a reality of a doctrinal win for what Hamas stands for, and correspondingly a doctrinal defeat for the Palestinian Authority", Mr Fayyad said.

The Palestinian Authority was established about two decades ago, as part of interim peace deals with Israel, and was meant to make way after five years for a Palestinian state alongside Israel.

However, Israeli-Palestinian negotiations repeatedly broke down, at times amid bursts of violence, and failed to produce a final deal.

Mr Fayyad said his budget deficit has widened in recent years, blaming Arab states that broke aid promises.

"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. European countries kept all their aid commitments and the United States honoured most.

Starting in December, Israel halted the monthly transfers of about US$100 million (Dh367m) in tax rebates it collects on behalf of the Palestinians.

That sum amounts to about one-third of the monthly operating costs of the Palestinian Authority.

Mr Fayyad said his government is on "the verge of being completely incapacitated".

About 1 million Palestinians who depend on government salaries "are at a very serious threat of being pushed into a circle of poverty", he said. This would double the poverty rate, which currently stands at 25 per cent in the West Bank and Gaza, he said.

Mr Fayyad said these dire consequences would happen in "short order", but he would not give specifics. Also yesterday, Mr Abbas declared that his Palestinian Authority would be known as the State of Palestine from now on, in keeping with UN recognition of Palestine as a non-member observer state in November.