IMF blames Arab donors for Palestinian cash crisis

The Palestinian Authority faces a serious cash crisis after receiving only half of the aid money it needs to function every month, the International Monetary Fund said Monday, blaming delinquent Arab donors.

At risk are the salaries of around 150,000 Palestinian civil servants, who support most families in the West Bank and Gaza Strip.

Many economic analysts say Arab donors are reluctant to pay up because of Palestinian infighting between Western-backed President Mahmoud Abbas' Fatah, which controls the West Bank, and the Islamic militant Hamas, which overran Gaza two years ago.

Arab donors believe if they withhold cash, it will pressure the two parties to reconcile, said Samir Hazboun, head of the Bethlehem Chamber of Commerce.

But IMF official Oussama Kanaan warned that everyday Palestinians are getting caught in the middle.

"Arab donors should be aware that if they don't pay, they are not punishing one party or another. The average Palestinian will be hurt," he said.

The Palestinian Authority needs around $120 million dollars in aid to balance its monthly budget, but is receiving only around $66 million.

At a summit in 2000, Arab countries pledged to give around $50 million a month to the Palestinian Authority, but they have sent only $77 million altogether this year, Kanaan said, or a little more than a quarter of the amount they promised.

European countries and the United States have largely fulfilled their aid pledges, economists said.

The Palestinian Authority owes around $530 million to local banks in loans to make up the shortfall, said Palestinian Prime Minister Salam Fayyad in a statement.

Kanaan said it was unlikely banks would keep extending credit to the Palestinian Authority.