Fayyad's plan, which aims to cut the PA's budget deficit, includes tax hikes, taxation of stock profits and forced retirement for 26,000 government employees, among other steps.
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The past few weeks saw marches in Ramallah, Nablus and Tulkarm; turnout ranged from dozens to hundreds. Over the weekend, hundreds rallied in Hebron, calling for Fayyad to step down. Meanwhile, sundry Facebook groups urged web users to voice their objection to the prime minister's financial policies and threatened to exacerbate the struggle.
PA officials have also leveled criticism at Fayyad's plan, calling him to let it go. According to sources at Israel's Foreign Ministry, some senior Fatah members fear that the public's disapproval could undermine their standing, while others are exploiting the unrest to undercut Fayyad. Fayyad himself has said that he is determined and committed to his plan, adding that he is not known for giving up. However, the financial crisis is eroding the domestic support he has enjoyed.
Grim outlook for PA economy
So far the PA has managed to contain the demonstrations, but the disorder, as limited as it might be, appears to have alarmed Fayyad's administration. After meeting with representatives of the PA's different sectors, the prime minister decided to freeze the austerity plan, instead raising the tax ceiling from 15% to 30%. He has also decided to tax previously-exempt sectors and institutions, as well as pension plans and stock profits.
Meanwhile, the International Monetary Fund has drawn a grim picture of the PA's financial state: PM Fayyad faces the challenge of cutting the deficit from $1.1 billion to $750 million, and achieving this target requires the PA to cut its expenditures and boost tax collection.
The handover of tax funds from Israel to the PA covers two-thirds of the Palestinians' expenditures, yet this revenue source has become less stable recently as result of Israeli decisions.
At this time, the only international pledge of aid to the PA for the year 2012 is a $200 million fund transfer from the European Union. American aid has not yet been approved by Congress, and other states – including Arab countries – have yet to pledge financial assistance.
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