Palestinian premier resigns
PALESTINIAN prime minister Salam Fayyad resigned at the weekend after repeatedly warning of the government’s precarious finances, a move that could complicate new US efforts to revive peace talks.
Mr Fayyad, who sought to create a stable foundation for an independent Palestinian state, will continue in his post until President Mahmoud Abbas, with whom he has been sparring for years, assembles a new cabinet. The International Monetary Fund (IMF) said last month that the Palestinian Authority’s ability to govern was being eroded by its financial difficulties, while Mr Fayyad had said the situation was unsustainable.
The departure of Mr Fayyad, a former IMF economist, comes a week after he met US Secretary of State John Kerry, who said he was seeking a “quiet strategy” to resuscitate peace negotiations between the Palestinians and Israel.
“With Abbas being busy in having to form a new government and working to overcome the budget crisis, he may not have that much time for the peace process that the US is trying to restart,” said Menachem Klein, a professor of political science at Bar-Ilan University and a former adviser to the Israeli government on peace talks.
The Obama administration is seeking to rebuild a relationship with the Palestinians that was strained over Mr Abbas’s bid to secure statehood through the United Nations (UN). After US pressure scuttled a 2011 UN Security Council resolution recognising Palestine as a state, the UN General Assembly voted to give it the status of a nonmember observer state last year. Mr Abbas “oversees negotiations and everything connected to foreign policy, and Fayyad deals with internal issues and has no diplomatic role at all, so this won’t influence” peacemaking, Ashraf al-Ajami, former Palestinian minister for prisoner affairs, said yesterday. Mr Abbas appointed Mr Fayyad prime minister in 2007 after a five-year stint as finance minister. Mr Fayyad won the trust of lenders, the US and Israel because of his campaign to make the Palestinian Authority’s finances transparent.
“Fayyad was trusted because he understood finance, he believed in transparency and his presence reassured international donors that the money would go to legitimate purposes,” Mkhaimar Abusada, a political scientist at Al-Azhar University in Gaza City, said. “It’s going to be very difficult to replace him.”
An opponent of violence, Mr Fayyad oversaw the formation of a US-trained security force that brought order to the West Bank and worked in co-ordination with Israel to prevent militant attacks.
Throughout his tenure, Mr Fayyad clashed with Mr Abbas over the extent of the premier’s authority. Hamas said his departure was not related to reconciliation efforts between the Palestinian movements. Israeli President Shimon Peres has compared Mr Fayyad’s nation-building to the actions of Israel’s first premier, David Ben-Gurion.
The World Bank said last month the Palestinian economy has become less competitive as agricultural productivity has been cut in half and manufacturing stagnates. The share of exports in the economy dropped to 7% in 2011, among the lowest in world. Without foreign aid, Mr Abbas’s government would face a budget deficit of more than 7% of gross domestic product (GDP) at a time when government borrowing from local banks is, according to the World Bank, “at the limit that the banking sector can sustain.”
Foreign aid accounts for about 14% of GDP, while public sector jobs account for 22% of employment.
The West Bank’s and Gaza’s $10bn GDP expanded about 5% in 2011, down from an average of about 9% from 2008 to 2010, according to the IMF. Unemployment rose to 19% in the first half of last year from 16% in the previous year, the IMF said.
The Palestinian Authority, the limited self-government set up in the 1990s under interim accords with Israel, was in the throes of a cash crisis in recent months because US and Arab countries that help to fund its budget had not delivered all promised aid. That forced government workers to subsist on partial salaries. Worsening the problem was an arrangement whereby Israel collects tens of millions of dollars a month in customs, border and income taxes on behalf of Palestinians who work and do business in Israel and transfers them to the Palestinians. Israel withheld the transfers twice in recent months after the Palestinians sought UN backing for a unilateral statehood bid. Mr Fayyad took loans to cover some of the shortfall, though protests broke out last year because of his inability to pay salaries in full and on time, and over planned tax increases that the demonstrations forced him to cancel.
The US has relieved some of the pressure on the Palestinian Authority’s finances, announcing the delivery of about $500m in withheld aid around the time of President Barack Obama’s visit to the region last month. Israel has resumed the transfers. Bloomberg