RAMALLAH — “How do you live your life on half a salary? And in the middle of a war?”
Fatimah al-Zahid mocked the question. The woman, who is a Palestinian civil servant, said their living conditions have already been deteriorating over the past two years.
Then, she said, came the war in Gaza, and things deteriorates even further, with soaring prices and debts accumulating.
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“Our priorities, as families, are meeting our children’s basic needs. There is no longer room in our lives for luxuries,” she said. “We live day by day. We can’t plan anything in the future. Our lives are now tied to the salary cuts that the Palestinian government announces.”
The crisis has forced significant changes to their daily lives as civil servants. As the mother of two children, al-Zahid has a small family compared to other Palestinian families. Yet, they are living at “the minimum”, she said, adding that they no longer have a social life “to avoid any further costs”.
She blames the Palestinian government for the crisis, especially the soaring prices.
“There is no control over the markets or prices, or even over the banks. Our lives depend on several parties and the options available for the employees are limited,” she said, adding that this government has “humiliated the people.”
Martyrs fund
Since November 2021, public employees have been receiving reduced salaries because of Israel’s deductions of tax and customs funds designated to the Palestinian Authority (PA), as well as a decline in foreign grants to the Palestinians.
Israel argues the funds encourage people to carry out terrorist acts.
According to the Paris Economic Protocol, which was part of the Oslo Accords in the 1990s, the Israeli Finance Ministry collects tax and customs on behalf of the PA, which administers parts of the West Bank. It then makes monthly payments to the PA — which is accused of widespread corruption — to help fund the Palestinian government. They represent 65% of the Palestinian government’s total income.
In recent years, Israel has been withholding the transfers over the PA Martyrs Fund — two funds operated by the PA which provide cash stipends to the families of Palestinians killed, injured, or imprisoned while carrying out violence against Israel, and disbursements to Palestinians imprisoned in Israeli jails. Israel argues the funds encourage people to carry out terrorist acts. Things complicated further since the Oct. 7 attack, when Israel decided to withhold funds destined to Gaza — and the PA refused to receive the partial payment.
The Palestinian government needs 950 million shekels (5 million) monthly to pay salaries, pensions and allowances for the Palestinian prisoners in Israeli jails and other social payments.
Budget deficit
Tariq Al-Hajj, an economist, said that Palestinian financial crisis began many years ago, leading to a chronic budget deficit.
“Unfortunately the Palestinian Authority was unable to pay this deficit because the accumulated debts are equal to twice the budget itself,” he said.
He said the government has been unable to borrow to cover its needs as its debts have already exceeded the limits. Some firms, he added, stopped their projects with the government because they haven’t received their payments.
At the same time, civil servants’ salaries don’t cover their needs. Al-Hajj said that a family of four receives an average of 2,000 shekels (3) that only cover their needs for one week.
The government’s domestic revenues, especially those linked to oil and smoking (about 850 million shekels monthly), have significantly declined, in part because of trafficking, he said.
“The main reason behind the current economic situation is the lack of skill in managing public funds,” he said.
Israel’s crippling measures
When the war in Gaza began, the Palestinian economy lost 60 million shekels which were brought in by Palestinian workers allowed to work in Israel. As part of its punishing measures, Israel barred Palestinian workers from working in its territory.
Israel has prevented West Bank workers from entering the 1948 lands or the settlements established in the West Bank. It also imposed choking restrictions on the movement of Palestinians inside the West Bank itself, impacting daily economic activities.
Moreover, Israel decided to withhold funds with which the Palestinian Authority used to pay salaries of its civil servants in Gaza. The Palestinian Authority has refused to accept the deducted tax funds, and insisted that it will only accept the whole amount for Gaza and the West Bank.
It said that Israel’s “decision means strengthening the separation of the West Bank from the Gaza Strip.”
Month-long negotiations led to the transfer of tax and customs funds to Norway, which played a key role in brokering the 1993 Oslo Accords that launched the Israeli-Palestinian peace process, but no details were announced on how the Palestinian Authority would receive it.
“The idea of transferring the funds to Norway does not solve the problem,” said Palestinian Prime Minister Muhammad Shtayyeh, adding that there is no agreement yet between Israel and Norway to transfer the funds to the Palestinian Authority.
Norway said in a recent statement it will transfer tax funds to the Palestinian Authority while holding those destined for Gaza.
“The temporary scheme will play a crucial role in preventing the Palestinian Authority from collapsing financially,” it said. The transfer will allow the PA to pay salaries to teachers, health workers and other public employees.
It is not clear whether the Palestinian Authority would accept the partial payment.
Shtayyeh told a Cabinet session on Feb. 12 in Ramallah that Israel’s measures are an attempt to expel the Palestinian Authority from Gaza. Such measures included closing all crossings to Gaza, preventing aid delivery from the West Bank and Jerusalem to the strip.
“But we continue to help in all ways and means,” he declared.
