July 29, 2012

Palestinian Financial Crisis Looms

By Shoshana Bryen
The Palestinians face an economic crisis more severe than the World Bank had anticipated; the Bank fears that the territories may become "ungovernable."  This is not actually new, but since the Bank in its panic is considering bypassing restrictions on money to Hamas, it is worth looking at the roots of the "crisis." The Palestinian Authority's 2012 budget -- produced by PM Salam Fayyad, the West's "go-to man" for economic decision-making -- was a fantasy.  It called for $3.5 billion in spending, including $1.1 billion in aid, and showed a deficit of between $750 million and $1.1 billion.  The latter has proven to be closer to the truth.  The Palestinian economy was expected to generate about $1.3 billion, and the PA planned to spend three times that.  (By comparison, Vermont, the smallest generator among U.S. states, produced about $26 billion last year.)  U.S. aid ($513 million, not including security assistance) was expected to cover about 20% of...(Read Full Article)