World Bank: Palestinian Authority's Budget Deficit Will Reach $1.2 Billion

The World Bank warned that the financial situation of the Palestinian Authority has "significantly worsened" in the past three months, with the budget deficit expected to reach $1.2 billion in the coming months. In a report released on Thursday, June 3, the World Bank attributed the "severe decline" in the Authority's revenue sources to the restriction of economic activities in the West Bank following the Gaza war that has been ongoing since October 15 of last year between Israel and the extremist group Hamas, which is recognized as a terrorist organization by the United States and the European Union. The World Bank stated that the budget deficit of the Authority, which was $682 million at the end of last year, is expected to increase to $1.2 billion in the coming months. According to the bank's forecasts, the economy of these regions is expected to shrink between 6.5% and 9.6%, but this outlook remains "highly uncertain." The World Bank noted that since the beginning of Hamas's attack on Israeli territory, about half a million jobs have been lost in the Palestinian territories, with approximately 150,000 of those jobs in the West Bank. Economic activity in the West Bank, which is under the control of the Palestinian Authority, is heavily tied to Israeli security matters. Tens of thousands of Palestinian workers who used to enter Israel daily for work from various parts of the West Bank have lost their jobs following the Gaza war. By order of the Israeli Ministry of Defense, Israeli employers are unable to hire Palestinian workers residing in the West Bank due to concerns about the recurrence of security attacks similar to those carried out by Hamas members in cities and villages in southern Israel. Many of these workers were employed in Israeli construction projects, which are now filled by tens of thousands of workers from countries such as China, India, or Eastern Europe. The World Bank stated that given the dire economic situation in the West Bank, the only option for the Palestinian Authority is to cut salaries for its employees and officials. The World Bank also suggested increasing foreign aid to the Authority as another solution to prevent the economic collapse of this institution. The Israeli Finance Minister announced last week that due to complaints the Authority has filed against Israel at the International Criminal Court in The Hague for the past nine years and the strengthened possibility of an arrest warrant against the Prime Minister and Minister of Defense, he intends to no longer allow Palestinian financial resources to be available to the Authority. Bezalel Smotrich also referred to the non-renewal of the exemption for cooperation between Israeli banks and Palestinian banks starting next month. Janet Yellen, the U.S. Treasury Secretary, stated on June 3 at a meeting of G7 finance ministers and central bank governors in Italy that Israel's threat to sever ties with Palestinian banks is "concerning" as it closes a vital channel for the Palestinian economy.