The security establishment on Thursday made a number of recommendations to the government about how to impose economic restraints on a Hamas-led government.
The recommendations included the curbing of fund transfers to the PA, the prevention of movement from the Gaza Strip to the West Bank, an effort to stop donations to the Palestinians, and a ban on the entry of Palestinian laborers starting this coming week.
What are the implications of these measures on the Palestinian economy? How would they influence the daily life of the Palestinians?
The United States has declared that it will curtail aid to the Palestinian Authority should Hamas form the next government, European leaders are inclined to adopt a similar stance, and Israel is weighing a freeze of tax collection on behalf of the Palestinians. What will happen should these threats be adopted?
I expect the transfer of tax rebates and customs to continue. Israel is collecting the taxes because it is not ready to let us do so. Is the Israeli government planning to freeze the transfers and cause anarchy or to confiscate monies that belong to others? Will international donors want to punish the Palestinian people? I believe that both Israel and international donors will not rush to implement the threats. They will wait to see how things develop in Ramallah.
And should Israel freeze the transfer of tax rebates, what will happen?
It will be a catastrophe. The Palestinian Authority has a deficit of USD 650 million, some 13 percent of the GDP. The Authority depends on these funds. It is fighting every month to pay its employees. On the tenth of this month we received January’s salaries but if the Authority does not get the money there will be no salary for February.
The Palestinian government employs 150,000 people; about a third of the Palestinian workforce. If the Authority’s employees do not get paid, they will become unemployed and unemployment will reach 70 percent, probably the highest in the world. The Authority pays USD 100 million in salaries every month, over USD 1 billion a year. If the Authority stops paying salaries the Palestinian GDP will shrink by 12 percent and become lower than the average GDP in Africa.
Two thirds of the Palestinian population lives below the poverty line, surviving on less than NIS 1000 (about USD 110) a month per family. The average Palestinian eats one meal a day. Authority workers, the children and relatives they support amount to 1 million people. If the Authority collapses, nearly all Palestinians will live off less than few hundreds of shekels a month. The Palestinian economy simply won’t exist.
Our security establishment recommended the government curbs trade with the Palestinian Authority and many Israeli are calling on the government to scrap trade relations altogether. Should this happen what will be the implications for the Palestinian people?
Total chaos. The Palestinian economy is completely dependent on the Israeli economy. The Palestinian workforce produces more than 90 percent of products for the Israeli market and 80 percent of Palestinian imports are from Israel.
Hamas leaders have warned they are not concerned by threats to curtail aid. They say the Palestinians are willing to starve for its cause and the Palestinian Authority can tap Iran and Saudi Arabia for assistance.
I totally disagree with them. Even if Iran agrees to assist with billions of dollars we know that this money will be difficult to reach the PA. If they want to make political statements of this kind for political propaganda, they are more than welcome to do so. Hamas has to understand that we have no alternative but to cooperate with Israel. They have to learn to play within the rules accepted by the international community and they will do so.