Donor countries will have to keep giving large amounts of aid to the Palestinian government in the foreseeable future, unless Israel eases access of Palestinian goods to Israeli and world markets, the World Bank said in a report Friday.
The warning came ahead of a meeting of representatives of donor countries next week in New York, on the sidelines of the UN General Assembly. The donors are to review their aid scheme, which is based on the assumption that injecting large funds into the Palestinian territories will boost the economy and make the Palestinians gradually less dependent on aid.
Donor countries have given billions of dollars to the Palestinians since 1993, in an attempt to prop up an economy battered by conflict with Israel and severe Israeli restrictions on Palestinian trade and movement.
In 2008, the Palestinian Authority received $1.8 billion, and is expected to get a total of $1.1 billion in 2009. The money goes to the Palestinian Authority of pragmatic President Mahmoud Abbas, who controls the West Bank and wants to establish a Palestinian state in peace talks with Israel. Abbas lost the Gaza Strip in a violent takeover by the Islamic militant Hamas in 2007.
Despite the support, the Palestinian standard of living has dropped in this decade, since the outbreak of Israeli-Palestinian fighting in 2000.
In recent months, Israel has eased Palestinian movement in the West Bank, prompting modest economic growth.
However, the West Bank and Gaza, on either side of Israel, remain cut off from each other. Palestinian exports from the West Bank are hampered by slow movement of goods through Israeli-controlled crossings into Israel or Jordan.
The Abbas government is still short of money, the bank said, citing a $400 million financing gap for this year. The government's net revenues were more than 15 percent below target in the first half of 2009, the report said.
"Unless further major steps are taken to enable sustainable private sector growth, particularly improving access to Israeli markets and to international ones, via either Israel, Jordan or Egypt, the Palestinian Authority will continue to require large amounts of donor aid for the foreseeable future," the World Bank wrote.
Earlier this year, the International Monetary Fund said significant GDP growth in the West Bank is possible this year. However, the IMF - like the World Bank - noted that such growth will only take place if more restrictions on trade and movement are lifted. Even then, the Palestinian standard of living would remain below that of 2000, the IMF has said.