A Palestinian street vendor waits for customers in the West Bank city of Ramallah on October 5, 2021
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West Bank
16 November, 2021

The Palestinian Authority (PA) urgently needs $400 millionto be able to provide services until next March, a planningadvisor to the PA said on Sunday, as fears grow of an imminent financial collapse.

Dr Estephan Salameh local Palestinian media that “the Palestinian government is going through the worstcrisis in a long time”.

On Monday, he reiterated to that "the crisis is partially due to the interruption of financial aid from international donors, especially the European Union, which hasn’t sent any aid at all to the PA for the year 2021”.

"The PA has suffered a prolonged economic crisis for years and is heavily dependent on donor aid from the EU, the US, and Arab countries to stay afloat"

A report published last week bythe Office of the United Nations Special Coordinator for the Middle East Peace Process (UNSCO) said theeconomic and fiscal situation in the occupied Palestinian territories remains “dire”.

The PA has suffered a prolonged economic crisis for years and is heavily dependent on donor aid from the EU, the US, and Arab countries to stay afloat.

According to Salameh, European aid to Palestine numbers around $686 million, including aid to the agency for Palestinian refugees and development projects.

The public budget's share of European aid is about $320 million,representing around 8.2% of the total, which was announced by Palestinian PMMohammad Shtayyeh back in March at around $3.9 billion.

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The EU's spokesperson in Jerusalem, Shadi Othman, told ձ’s sister publication Al-Araby Al-Jadeed last week thataid to the PA has stopped “for reasons specific to the EU, which have causedaid to stop in other regions as well".

The impact has been felt across the public sector, with the PA likely to cut to cover deficits.

UNRWA, meanwhile, has said it faces an "existential" crisis, with theagency’s ability to keep 550,000 children in school, provide health care for thousands, and pay the salaries for its 28,000 staffers in November and Decemberunder threat if the is not covered soon.

According to Othman, the EU will resume its aid to the PA in the coming months. However, he added, “the real solution to the PA's crisis remainsthe return of Palestinian tax money by Israel”.

Tax money retained

The EU spokesperson wasreferringto the on behalf of the PA.According to the Paris economic protocol, signed in 1994 between Israel and the PLO, Israel, being in control of all border crossings, is responsible for collecting import taxes and transferring them to the PA, keeping a 3% commission.

In recent years, the Israeli government large amounts ofPalestinian taxes, causing much of the PA’s financial deficit. On Saturday, the Palestinian Ministry of Finance announced that the Palestinian tax money retained by Israel has exceeded $640 million.

"The real solution to the PA's crisis remainsthe return of Palestinian tax money by Israel"

According to an economic researcher at Bisan research centre in Ramallah, Jebril Mohammad, the import taxes make up 80% of the tax income of the PA.

“The taxes that the PA collects from employees, workers and small traders in the Palestinian territoriesrepresentno more than 20 to 25% of the total bulk of tax money that comes into the PA’s budget. The rest comes from taxes on imports,”Mohammad told .

“This strategic item of the public budget was left in the Paris protocol to the goodwill of the occupying state, which uses it for political pressure, which means that much of the financial crisis is actually political,”he added.

Occupied resources

Another political factor contributing to the constant budget deficit of the PA is the lack of access, for Palestinians, to Palestinian natural resources. Most of these resources are located in , classified by the Oslo Accords as being under direct Israeli control, representing more than 60% of the West Bank's territory.

Nearly all illegal Israeli settlements, numbering over 400,000 settlers in the West Bank, are located in Area C.

According to a from2013, Palestinian resources in Area C could contribute as much as $3.4 billionto the Palestinian budget, which is around three-quarters of Palestinian public expenditure.

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Jebril Mohammad explained to that “these resources include more than 26 kilometres of the Dead Sea’s coast, exploited by Israel for mineral and cosmetic products, as well as tourism andstone quarries in the hills, exploited by Israel for building material, agricultural lands in the Jordan valley, exploited by Israeli settlements, and the natural gas off the Gaza Strip shore, also exploited by Israel”.

Mohammad insisted that “it requirespolitical will from thePA to encourage Palestinian investment in Area C, in defiance of Israeli control, and from the international community to protect it, both of which are lacking”.

"It requirespolitical will from thePA to encourage Palestinian investment in Area C, in defiance of Israeli control, and from the international community to protect it, both of which are lacking"

According to the Palestinian Central Bureau of Statistics --the GDP of the Palestinian territories, excluding occupied East Jerusalem, dropped from $3.8 billion in the first quarter of 2020 to $3.1 billionin the second quarter of the same year, mainly due to the Covid-19 pandemic.

In late October, Palestinian PM Mohammad Shtayyeh headed a Palestinian delegation to Brussels which aimed, according to Dr Estephan Salameh,at convincing the EU officials to resume their financial aid to the PA.

Qassam Muaddi is 's West Bank reporter, covering political and social developments in the occupied Palestinian territories