WASHINGTON: Palestinians are in a precarious economic position and may struggle to keep financing their budgets over time, the International Monetary Fund mission chief for the West Bank and Gaza warned.
Christoph Duenwald told the Associated Press in an interview that the Palestinian territories are plagued by a host of problems: Slowing growth, high unemployment, large budget deficits, Israeli restrictions, and an unpredictable stream of donor aid.
Progress in newly restarted peace talks with Israel holds out the most hope for relieving Palestinian hardship.
“The whole problem is rooted in the political conflict between Israelis and Palestinians,” Duenwald said late Wednesday night ahead of the release of an IMF staff report on West Bank and Gaza economies.
Extensive Israeli restrictions on movement and access should be eased and eventually removed, said the report released Thursday. It added that Israeli officials gave no indication such an easing was forthcoming.
The economic outlook will brighten if peace talks succeed and a supporting economic package is implemented. This could attract investment and aid, boosting growth and employment and potentially easing budget financing.
The breakdown of peace negotiations with Israel in late 2010 ushered in almost three years of economic decline and political stalemate, the IMF said.
“This turn of fortune, combined with increasingly unpredictable donor aid, has reached a point where the early achievements in economic institution-building are being threatened,” said the report, prepared for a semi-annual meeting of Palestinian donors.
The meeting of the donors group, known as the Ad Hoc Liason Committee, is set for Sept. 25 during the United Nations General Assembly.
The report said economic prospects for the West Bank and Gaza Strip are dim if Palestinians continue down the same path they are on. And there is a risk the situation could deteriorate further if aid falls short or political instability increases.
The Palestinians depend heavily on aid from donors: about $1.3 billion this year, equivalent to nearly 12 percent of annual gross domestic product.