World Bank cuts PA funding

ISN SECURITY WATCH (Thursday, 2 February: 12.52 CET) – The World Bank has announced that it has withheld its December payment of US$60 million to the Palestinian Authority (PA) due to its failure to implement required reforms.

In its release of an updated report on the PA's fiscal position on Wednesday, the World Bank said that it had cut December's contribution to the PA from a multi-donor reform fund due to "uncontained" spending, precipitated by a sharp increase in salaries and hiring.

The PA is holding talks with World Bank officials in a so far unsuccessful effort to stem the growing fiscal crisis. "There have been some discussions with the caretaker government in Ramallah, but there has been no formal request from the Palestinian Authority," a World Bank official reported.

Israel also announced that it was withholding $US55 million in tax and customs duties on Wednesday due to Hamas' victory in the recent Palestinian Legislative Council elections.

There were allegations from opposition parties prior to the poll that the ruling Fatah party was engaged in the mass-hiring of militants from the Fatah-aligned Al Aqsa Martyrs' Brigades.

With Hamas winning the poll, the already broke PA now faces dire financial straits as Europe and the US consider withholding aid payments due to the Islamic group's failure to disarm its armed militia and recognize Israel.

Saudi Arabia and Qatar promised an emergency contribution of US$33 million on Wednesday so that the PA can pay its 137,000 employees.

Egyptian intelligence chief Omar Suleiman said on Wednesday that Iran was also likely to step in to provide financial aid to the PA.
(By ISN Security Watch staff)