This week, the chief of staff of Israel's army warned that Gaza is facing a humanitarian crisis that could expedite the threat of war. A few days later, Israel's Defense Minister Avigdor Lieberman conceded that there were issues in the Strip, but said there was "no humanitarian crisis." So what's actually happening in Gaza?
Over the past two years, the situation in the Gaza Strip has deteriorated, mainly for the following reasons:
International aid to help rehabilitate the coastal enclave following the last war that Hamas and its allies fought with Israel in 2014 declined in 2017. That immediately affected construction activity in the strip and resulted in a decline in the number of those employed and drawing salaries.
In addition, since the end of 2015, Israel has drastically cut the number of permits that it has granted to merchants and other business people to leave the strip via Israel. The number has dropped from 3,500 to only about 675 at the beginning of this year. In the process, the private sector in Gaza, including the employment of salaried employees, has been constrained and has shrunk.
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In 2017, the Finance Ministry of the Palestinian Authority in Ramallah cut the salaries of public sector workers in Gaza engaged in civilian and security activity and thousands were given early retirement, which involves lower benefits. Most have been forced not to work since 2007, when Hamas took control of Gaza. Their salaries were a regular allowance of sorts that provided for their extended families. The cuts were carried out due to the financial crisis at the Palestinian Authority and also as a punitive measure against Hamas. At the same time, the Hamas government continued to pay – and often belatedly – about half of the salaries of thousands of its public sector employees who actually did work.
Financial difficulties and an attempt to punish Hamas were also behind the cuts in electricity provided to the Gaza Strip, with Ramallah refusing to pay for all of the electricity bought from Israel (120 megawatts). Many people made up for the short supply through private and neighborhood-based solutions that cost families considerable sums for measures including the installation of solar panels, the use of generators and connecting to large neighborhood generators.
The cumulative effects of these negative forces over the past two years have included a drop in savings in the private and public sectors, at least for those who still had savings, and dependence of more people on the remaining salaries and other income in each extended family.
In any event, the Gazan economy has been underperforming at least since 2005. The reasons are: the elimination in 2005 of entry permits for labors to work in Israel; a sweeping Israeli policy barring Gazans from leaving the strip since the Hamas takeover in 2007, with the exception of several categories set by Israel; limits on the importation into Gaza of essential raw materials and spare parts; limitations on exports that were eased to some extent mainly due to American and Dutch pressure, but the scope of exports of Gazan products is still much lower than it was in 2000. In conditions of underperformance, any harm to one part of the economy results in a chain reaction that is immediately felt and that produces economic paralysis, a rise in unemployment and a drop in purchasing power.