'Fuel Crisis Between PA and Israel Over': Palestinians to Accept $568 Million in Tax Money

Defense establishment recommended move in light of grave financial crisis endured by the PA, which agreed to receive the funds days after Abbas fired top advisers

Palestinian Authority President Mahmoud Abbas speaks during a meeting with Palestinian leadership in Ramallah, July 25, 2019.
MOHAMAD TOROKMAN / REUTERS

Israel decided on Thursday to transfer the Palestinian Authority two billion shekels ($568,320,000). The decision came following a recommendation from the defense establishment, which issued the suggestion in light of the ongoing economic crisis plaguing the PA.

Israeli officials deemed the move to be significant progress, because for months the Palestinian leadership refused to accept funds from Israel in protest over the Israeli decision in February to reduce its payments to the PA, deducting the sum the PA pays to security prisoners in Israeli prisons and their families. 

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The decision to accept the money from Israel will enable the PA to pay a substantial part of its debt to the Israel Electric Corporation.   

Palestinian Civil Affairs Minister Hussein al-Sheikh stated that Israel has agreed to absolve the PA from the excise tax it charges for fuel the Palestinians acquire, and to retroactively apply this exemption on the past seven months. 

According to Palestinian financial sources, the move will provide the PA with a double gain: It will be able to purchase gas without paying the excise tax, and could then tax Palestinian residents who buy the fuel.

"The gas crisis between the PA and Israel is over," al-Sheikh said. However, the Palestinian civil affairs minister did clarify that "this doesn't mean that the PA's financial crisis is over, because Israel is still holding on to billions of shekels." 

Since February, the Palestinian Finance Ministry has been refusing to accept tax refunds and import taxes Israel owes, which added up to $2.4 billion in 2018. The Palestinians say they will continue to refuse to receive these funds as long as Israel poses hurdles to the PA's payment of stipends to the families of prisoners and released prisoners.

Israel has so far offered that the PA charge the excise tax on gas from Palestinians, but Palestinian President Mahmoud Abbas has not agreed to that. 

Palestinian Prime Minister Muhammad Shtayyeh announced earlier Thursday that the Palestinian government will pay its employees 110 percent of their salaries next month as compensation for salary cutoffs that were made in previous months. 

The move comes after Abbas fired all his advisers earlier this week amid the deep financial crisis plaguing the PA. The crisis escalated in February when the PA refused to continue accepting any money from Israel following the tax-funds slashing, which accounted for 63 percent of the PA’s budget.

In April, the office of the United Nations Special Coordination for the Middle East Process released a report saying the PA's viability is under threat as it faces unprecedented challenges.

"A major fiscal crisis, coupled with growing humanitarian needs and the lack of a political prospect for a negotiated solution, threatens the stability of the West Bank and the very survival of the Palestinian statebuilding effort," UN Mideast envoy Nickolay Mladenov stated at the time.

The report warned of "the unprecedented financial, security and political challenges" faced by the Palestinian government.

According to the report, these decisions have caused the Palestinian government to lose some 65 percent of its revenue and forced it to take extreme austerity measures.