Palestinian Cabinet Passes $3.9 Billion Budget for 2013

Twenty-five percent is earmarked for defense; Palestinian Authority hopes donors will cover $1.4 billion shortfall.

The Palestinian Authority’s cabinet on Thursday approved the 2013 draft budget. It now goes to Palestinian President Mahmoud Abbas for his approval.

Overall spending projections for the year are around $3.9 billion, 54 percent of which will go to wages.

Roughly one-quarter of the total budget is earmarked for defense and security, 16 percent for education and 10 percent for spending on health. An additional $350 million is to be allocated for development projects.

Revenues from taxes, customs and related tolls are expected to come to $2.6 billion for the year.

The anticipated budget shortfall is thus around $1.4 billion. The PA hopes that contributions from donor states and foreign aid will cover at least $1 billion of this amount.

Prime Minister Salam Fayyad has managed to reduce the budget considerably, from 32 percent of gross domestic product in 2009 to 13 percent of the anticipated GDP in 2013.

According to Palestinian figures, the Palestinian economy loses at least $500 million a year as a result of Israel’s control of land, water and mineral resources as well as harsh restrictions on movement and other limitations.

Of the PA’s 154,000 state employees, 65,000 work in defense and security. Some 62,000 of the state employees live in the Gaza Strip; 34,000 of these are registered as employees of the defense establishment in Ramallah. Their wages are paid out as a kind of government allowance or benefit, since the Ramallah-based PA government does not share in tax revenues collected by the Hamas-controlled government in the Gaza Strip.

The Palestinian Legislative Council received the draft budget on Monday and was invited to discuss it with cabinet members on Wednesday. Legislators told the cabinet that one day was not enough to study the budget, and asked to hold the discussion next week instead.

To their surprise, legislators learned via text messages sent to their cell phones on Thursday that the cabinet agreed to postpone the meeting.

The parliament asked Abbas not to sign the budget before its members, who customarily discuss bills in their various committees, have a chance to question treasury officials and to discuss the proposal with Abbas.