‘PA could collapse from COVID-19 economic backlash’

The PA could collapse as a result of the dangerous impact the COVID-19 pandemic would have on the Palestinian economy, UN Middle East envoy Nickolay Mladenov warned on Sunday.

“If current trends continue, the damage to the Palestinian economy will be substantial,” he said.

The Palestinian Central Bureau of Statistics has warned that if a COVID19 shutdown were to last three months, the Palestinian GDP would contract by 5.1%, and by 7.1% if the shutdown were to last six months. The latter would be the largest contraction since 1994, when such data was first compiled in a reliable way.

“Economic contraction and necessary public health restrictions are having an adverse effect on the economy and the viability of the Palestinian Authority,” he said.

“Revenues from trade, tourism and transfers have declined to their lowest levels in the last two decades. It is estimated that the fiscal gap for 2020 will reach $1 billion by the end of the year,” he said.

“Preserving the functioning and stability of the PA is vital to the security and well-being of both Palestinians and Israelis alike,” Mladenov said.

Concern regarding the potential financial collapse of the PA predates the pandemic, but the virus has intensified the situation as donor funding has dropped. The US in particular has withdrawn over half-a-billion dollars in annual financial support.

Israel in the past has also withheld tax fees it collects on behalf of the PA equal to the sum of the money the PA spends in monthly stipends to terrorists and their families. During the current crisis Israel has continued withholding that sum, which amounts to NIS 600 million a month.

The coronavirus has made a fragile situation even worse with Palestinian

Authority Prime Minister Mohammed Shtayyeh predicting a $3.8b. economic loss.

“The current situation is extremely dangerous and calls for bold action by all stakeholders,” said Mladenov as he called on the international community, Israel and the PA to take action.

Mladenov welcomed Shtayyeh’s announcement of an emergency budget. He suggested it focus on health-related expenses, business assistance, income support for vulnerable Palestinians and government salaries.

“Gaza’s specific needs must be adequately addressed too,” he said.

Mladenov welcomed the transfer last month of NIS 120 million in tax fees to the PA.

“Urgent discussions however need to take place on how Israel can ensure regular transfers, even if clearance revenues continue to fall, in order to guarantee a smooth functioning of Palestinian institutions and service delivery to the Palestinian people,” he said.

Last week Norwegian Foreign Minister Ine Eriksen Soreide called for increased international support to the Palestinians in the name of the Ad Hoc Liaison Committee, which her country chairs. The AHLC was due to meet at the beginning of April to discuss donor funding for the PA, but the gathering was postponed due to the coronavirus.

Left-wing NGO Geneva Initiative said Israel has a vested interest in ensuring the viability of the PA, because otherwise it would be tasked with servicing the Palestinians.

“Sharp reminder to Israel of its responsibility to ensure the PA’s ability to function, strengthening it is in the interest of all. Without it, Israel would likely fill the vacuum and assume responsibility of administering services for close to 3 million Palestinians in the West Bank,” it tweeted.

Khaled Abu Toameh contributed to this report.