The Palestinian Authority is nearing its goal of covering all its own running expenditures. The news came last Wednesday, as PA Prime Minister and Finance Minister Salam Fayyad presented the recently approved 2010 budget at a conference open to the public. The PA's total running expenditures come to $3.17 billion; and for the first time since its establishment, the PA's income is expected to rise above the $2 billion mark - $2.02 billion in 2010 as compared to $1.688 billion in 2009. This amounts to a 20 percent increase, for now, but the donor countries will continue to fund the deficit.

The promises made in connection with the budget relate to "independence, greater social equality, the building of state institutions, a special budget for supporting Area C [in the West Bank] and the threatened East Jerusalem" - a reminder that this is an economy under occupation. The explanatory materials that accompany the figures weave together PLO-style slogans, while the accounting definitions and goals resemble those of the World Bank.

With a defunct legislative council, the deliberations required to draft the budget took place within the government and as part of other internal consultations. Wednesday's discussion enabled various representatives of the public to ask Fayyad questions (people identified with Hamas were not among them), but in any case the budget had already been approved. Any transparency in the matter is after the fact.

The optimistic forecast is buttressed by a 6.8 percent growth rate in 2009, an expected growth rate of 7 percent in 2010, and improvement in the collection of taxes and various other payments. The growth rate is due in large part to recovery in the construction sector, while the increased collection stems from the Palestinian Authority's implementation of administrative reforms.

Fayyad confirmed that the elimination of a number of checkpoints and roadblocks in the West Bank did ease the recovery, but did not cause it. On the contrary, he said, the PA has managed to achieve growth despite all of Israel's restrictions - which include roadblocks and barriers, limitations on movement, the blockade of the Gaza Strip, the separation fence and the constraints on Palestinian development in more than 60 percent of the West Bank (designated as Area C).

A look at the flourishing Jordan Valley on the East Bank of the Jordan River, a senior official in the Palestinian Finance Ministry told Haaretz, demonstrates how the Palestinian economy is losing in the face of the constraints Israel has imposed on development in the western side of the Jordan Valley.

Were it not for the Gaza blockade, in Fayyad's assessment, Palestinian activity would add another $500 million to the income portion of its budget. Gaza is "costing" the PA in Ramallah $120 million monthly (mainly in the transfer of salaries and welfare payments to Gaza residents) or $1.4 billion annually - more than the total aid the PA receives from donors.

Here is an absurdity: This regular support of the population in the Gaza Strip is actually strengthening the Hamas government there. However, the explanatory materials that accompanied the budget promise that the PA stands firm in its determination to sustain financial support of the Gaza Strip "and will spare no effort to lift the siege imposed on it, begin its reconstruction, and unite the Palestinian people once again."

The sword overhead

The sword of the Israeli restrictions dangles constantly over the heads of the Palestinian economists. It is not spoken of, but within the policy behind the budget lies another contradiction. Officially, it encourages popular resistance against the occupation, but the PA knows that Israel sees this, too, as illegitimate activity to which it can respond with sanctions - thus blocking growth.

In the meantime, everyone prefers to focus their attention on the more positive scenario. The PA even intends to increase its part in the Palestinian development budget - $670 million in 2010, as compared to $400 million in 2009.

The item "wages" of the expenditures went up a bit this year (from $1.467 billion in 2009 to $1.55 billion), but with respect to the proportion of salaries in the GDP, this is a drop (to 22 percent from 24 percent last year). The PA plans to continue to reduce the cost of the public sector, with the aim of "improving the competitiveness of our production."

Key data was missing from the PowerPoint presentations shown on Wednesday to journalists and the other conference attendees: the budget of the Interior Ministry and the security organizations subordinate to it. This absence was especially obvious as those who formulated the summaries and explanations, headed by Fayyad, took particular trouble to boast of the increases to the budgets of the social ministries.

"In the context of the government's objective of achieving greater social equality, the share of the three ministries (Education, Health and Social Affairs) in recurrent expenditures increased from 39 percent in 2009 to 42 percent in 2010," exults the budget summary.

An examination of the figures given to those who attended the conference reveals that the Education Ministry's share has in fact declined (from 20.3 percent to 19.1 percent). The significant increase can be found in the budget of the Social Affairs Ministry (from 7.7 percent of total expenditures in 2009 to 11.1 percent in 2010 - or from NIS 724 million to NIS 1.2 billion), to cover the increased welfare payments, mainly after the attack on Gaza. This is the other face of the growth.

What would Arafat do?

The budget, said Fayyad, also reflects history. One can take this statement, which was not sufficiently developed, as a comment on the past policy of the PA under Yasser Arafat - to inflate employment in the public sector, particularly the security organizations, for two reasons: to entrench a stratum loyal to the regime and to provide a long-term temporary solution to the problem of chronic unemployment.

There are 147,726 recipients of salaries in the public sector (in the West Bank and the Gaza Strip; in Gaza, many of those enrolled in the PA's payroll - especially the 20,000 security employees - do not work under the Hamas regime, by order of PA President Mahmoud Abbas). Of the total salaried employees in the public sector, 63,000 work in the security organizations under the Interior Ministry. The Interior Ministry's share in the 2010 budget, as reported to Haaretz by a senior official at the Finance Ministry, is $756 million. Of this, $620 million is allocated for salaries. The Education Ministry, by comparison, is designated $546 million total ($410 million for salaries). And as an audience member at the discussion noted, when the elementary school student population is growing by 3 percent annually and the Education Ministry's budget is being cut, it is hard to see any major social achievements.

The speakers at the conference were critical of the Interior Ministry's share. The clear absence of precise figures indicates just how sensitive an issue the security organizations represent, which even Fayyad's Finance Ministry - with its aspirations of transparency - has seen fit to circumvent.

As long as there is talk of efficiency, it would have been possible to discuss the necessity of so many security personnel and police. If national unity is on the table, one can be concerned about the role of various official organizations in suppressing the political activity of the opposition (not only armed Hamas activity). And if there is talk of striving for independence, one could expect the American and European involvement in training the PA's internal security organizations to be questioned.

And above all, there is always the suspicion hanging over the Palestinian security organizations that they are working hand in glove with the Israel Defense Forces and the Shin Bet security service. The figures missing from the PowerPoint presentations clearly demonstrate the contradiction between the PA's declared desire to develop human resources within its society and the need of the regime, limited as it may be, to preserve itself.