The Palestinians’ Not-so-secret Weapon Against Austerity

Slashed salaries are the price being paid by tens of thousands of families for the battle of principle that Palestinian President Mahmoud Abbas is waging against Israeli policies

Palestinian President Mahmoud Abbas praying at the start of a cabinet meeting,  Ramallah, July 25, 2019.
Mohamad Torokman / Reuters

Here’s some good news for Eid al-Adha for public-sector workers in the West Bank and Gaza Strip: Your telephone and internet won’t be disconnected if you’re late paying the bills, and the banks and credit card companies won’t demand the full monthly payments on the loans they’ve given you, nor will they charge you late fees. This was announced this week by the Palestine Monetary Authority and three Palestinian communications companies, including the largest, Paltel.

The monetary authority and the companies were acceding to a direct request by Palestinian Prime Minister Mohammad Shtayyeh that they show some patriotic responsibility and national solidarity and take civil servants’ financial woes into account. For the last five months, civil servants have received only 60 percent of their salaries (except for those who earn 2,000 shekels, or $575, a month or less, who are paid in full). The answer to the great riddle of how they’re getting by is first of all political.

Slashed salaries are the price being paid by tens of thousands of families for the battle of principle that Palestinian President Mahmoud Abbas is waging against Israeli policies. On orders from the president, the Palestinian Finance Ministry has refused since February to accept any of the tax and customs clearance revenues Israel owes it, which last year came to around $2.4 billion. This refusal stems from Israel’s unilateral decision to deduct the amount of money equivalent to what the PA pays as monthly allowances to families of Palestinians jailed by Israel and released prisoners (which Israel estimates at $138 million a year).

Abbas is seeking no less than the repeal of the Israeli law that allows this confiscation of funds – theft, as defined by the Palestinians. He assumed that Israel, which is well aware of the political dangers the PA’s financial collapse would entail, would blink first.

He wasn’t totally wrong. Israel proposed that to partially replace the missing funds, the PA could directly collect the excise tax on fuel sold in the West Bank and the Gaza Strip, instead of Israel collecting it for the PA. This tax amounts to some $65 million a month, which would reduce the sum Israel is confiscating in violation of both the Paris Protocol on Economic Relations and the law.

But even if senior officials in the PA Finance Ministry and Civil Affairs Ministry supported this interim solution, Abbas has so far rejected it. And he, as is known, has the last word. He hasn’t blinked, and Israel has stopped blinking. And the Palestinian people actually support him.

In 2018, transferred clearance revenues made up about 60 percent of the PA’s total revenues. Because of the PA’s political decision to refuse them, it has adopted an emergency budget for 2019 that relies on income from local taxes, additional bank loans and a promise by Arab countries to give it a “safety net” of $100 million a month (of which only 40 percent has so far been paid). It has also stopped sending patients to Israeli hospitals as part of a plan to disengage from the Israeli economy.

Aside from cutting salaries, the PA currently isn’t paying its debts to suppliers (from garages and printers to insurance firms, drug companies and hospitals). Reports are also beginning to trickle in of an economic domino effect: private-sector workers put on forced leave; students abandoning their studies for next semester; families skipping various types of insurance payments, including for health insurance; a drop in sales (including the number of sheep sold for Eid al-Adha); and freezes on many projects. This in turn is expected to affect municipalities and local tax revenue, which could lead to another salary cut.

Palestinian Prime Minister Mohammad Shtayyeh speaking in Jericho in the West Bank, July 3, 2019.
Mussa Qawasma / Reuters

Abbas vs. the Islamists

Abbas is both personally and politically opposed to the armed activities for which some of the prisoners are serving long prison terms. He doesn’t show much emotional interest in them and their families, and he’s alienated to the point of revulsion from the Islamist organizations, especially his main rival, Hamas.

His security agencies continue to try to repress the Islamists in the West Bank, sometimes before their arrest by Israel and sometimes after they’ve been released from Israeli jails. On his orders, the monthly allowances to families of several hundred Hamas and Islamic Jihad prisoners have been halted, as have salaries and allowances to supporters of another rival, Mohammed Dahlan.

Within his own Fatah party, Abbas (with help from Jibril Rajoub) has also tried to ostracize the Palestinian Prisoners Society and its leader, Qadura Fares, because of Fares’ closeness to Marwan Barghouti, a senior Fatah leader who is serving a life sentence in Israeli prison and who opinion polls place as the No. 1 candidate for the presidency.

In 2007 and 2008, Fares was a driving force behind passage of the law to pay stipends to the families of Palestinians jailed in Israel, arguing that this was necessary to prevent them from falling into poverty and to let their children go to college. Fares remains popular in Fatah, but his promotion in party institutions has been vetoed from above and funding for the organization he has been reelected to head has been cut.

Yet it turns out that none of this bears any connection to Abbas’ position, which is that Israel mustn’t be allowed to touch the PA’s revenues or intervene in how they’re spent. His spokespeople make sure to announce at the start of every month that allowances to the prisoners’ families will be paid as usual.

What local media has termed the “gestures” (the same word used for Israel’s declared partial lifting of movement restrictions) offered by the communications companies are certainly nontrivial in a society rife with cellphones (by the end of 2018, the 4.9 million residents of the West Bank and Gaza had around 4.5 million cellphone subscriptions, and that doesn’t include subscriptions to Israeli cellphone companies). Every family has at least one smartphone, the Palestinian Central Bureau of Statistics said in May.

The number of internet connections is also growing every year. At the end of 2018 there were 316,000, up from 120,000 in 2010. There are also some 470,000 landlines.

The Palestine Monetary Authority’s order that banks and credit card companies be considerate of civil servants with outstanding loans corresponds with one of the most frequently heard sentences in daily life, usually said in a tone of helplessness: “After all my debt payments and other payments, I have 200 shekels left in the bank,” a young teacher at a government school told me this week.

The total value of bounced checks at he end of June came to $108 million, up about a quarter from the same period last year, the monetary authority said. There was also a 14.5 percent increase in the number of bounced checks, to 68,000.

Financial blows

This isn’t a new problem; it has been a worrying fact of life for years now. It is generally attributed to the practice of viewing checks as a kind of loan and to the courts’ heavy workload.

But it’s impossible not to connect the recent rise in the number of returned checks to the financial blows that have landed on the Palestinians over the past year: the reduction in the PA’s payments to Gaza; the additional taxes imposed by Gaza’s Hamas government on both goods and merchants; a drop in donations to the PA; and the cancellation of American aid to both the PA and UNRWA, the UN aid agency for Palestinian refugees. Hundreds of “USAID refugees,” who once worked on projects financed by American aid, have either been without a paycheck for months or, if they’re among the lucky ones who have found work, are now earning local salaries, which are much lower.

There are some who think the Palestinian government has no Plan B and is simply waiting for a miracle, perhaps as a result of next month’s Israeli election. Still, it has taken several steps that are more than declarative.

In line with its decision to disengage from the Israeli economy, it has once again urged the people to give preference to Palestinian products over Israeli ones (in May, there actually was a slight increase in the production of Palestinian alternatives for Israeli products like food and cigarettes). Over the last six months, some 70 tons of goods that were smuggled in from Israel without paying Palestinian customs duties have been seized before they reached Palestinian markets, the PA’s National Economy Ministry announced this week.

The Palestine Investment Fund is advancing a plan to reduce dependence on electricity purchased from Israel by setting up solar energy parks. One such park, near Jericho, is set to start operating, and two more are under construction in Tubas and Jenin.

Shtayyeh’s government has adopted a plan of economic clusters focusing on geographic regions defined by their main economic activity: agriculture (Qalqilyah, Tul Karm, Jenin and Tubas), industry and trade (Hebron and Nablus) and tourism (Ramallah and Bethlehem). Its goals are to make the government’s investments more efficient, spur the private sector and improve coordination between them.

Plans are also being advanced to expand economic ties with Jordan, and increase the duty-free quota for Palestinian goods sold in Indonesia. In the same spirit, Bassem Khoury, head of the Union of Palestinian Pharmaceutical Manufacturers , announced that the manufacturers could increase production to account for 80 percent of the drugs consumed in the local market (up from 60 percent today) while also battling efforts to dump Israeli drugs on the market.

In addition, a small popular committee renewed its efforts this week to urge people to minimize their purchases of Israeli goods. It billed this as a first step toward more aggressive action against Israeli imports, including fruit.

One could question the Palestinians’ ability to radically change consumption habits developed over many years, as well as the Palestinian economy’s ability to overcome the restrictions imposed by Israel. But even though Palestinians have distanced themselves from their parties and are deeply suspicious of the PA and its leader, Abbas, the people have shown their understanding for the motive behind the worsening of the economic slowdown. The Palestinians have once again pulled out their not-so-secret weapons for persistence and tenacity – their ability to contain increasing material losses, and their social solidarity and mutual aid, even if only within the framework of the extended family.