World Bank Official: Palestinians on Verge of Bankruptcy

Nigel Roberts tells Haaretz that within a month the PA won't be able to pay its employees' salaries.

The Palestinian Authority, the largest employer in the territories, is facing a fiscal crisis that could result, as early as next month, in it being unable to pay the salaries of its 130,000-plus officials and security staff, Nigel Roberts, the World Bank's man in the West Bank and Gaza Strip said in an interview to Haaretz.

The five years he has spent in the World Bank's offices in the A-Ram neighborhood, on the northern border of Jerusalem, have been the worst years for the Palestinians and their Israeli neighbors since the occupation. Roberts warns that if all of the parties involved do not act more courageously, the worst of all may be yet to come. He says he is returning to the World Bank's headquarters in Washington, D.C. with major concerns.

To put it simply: The PA is on the verge of functional bankruptcy. The failure to make the salary payment in full and on time will affect hundreds of thousands of people who feed at its table, and the tens of thousands of suppliers and merchants who earn their living from its employees. They will join the masses of unemployed. According to the World Bank, the unemployment rate in the territories exceeds 20 percent, with a rate of about 30 percent in the Gaza Strip, over 40 percent in the southern part of Gaza and among young people (ages 16-25) in southern Gaza, the favorite source of cannon fodder for Islamic Jihad, unemployment reaches the alarming rate of 70 percent. The bankruptcy of the PA following the elections, Roberts warns, could generate a shock of unimaginable dimensions.

"The Palestinian government needs the continued assistance of the international community," Roberts declares, "and to secure that, it must begin to assume its responsibilities." Raising salaries at a time when resources are unavailable for this, he notes, is precisely the opposite of demonstrating responsibility and reliability. The direct consequence of this move was a decision by the Bank, supported by the European Commission, to freeze $60 million for funding the PA's operating budget. According to Roberts, this far-reaching step was taken because the Palestinians did not fulfill their commitments on budget control. Were the donors not to hold the PA responsible, they would lose the confidence of their taxpayers that enough control can be exercised to prevent the money from being used to finance acts of terror.

Roberts notes that the amount of assistance the Palestinians are getting - $5 billion in five years, or $300 per capita annually - is the highest granted to any entity since World War II. "To maintain the deep involvement of the donors, and their diplomatic attention, as well as the desire of the private sector to invest additional money, the PA must improve its performance," Roberts states. Unfortunately, he continues, Yasser Arafat's departure has not brought about a dramatic change for the better - in fact this last year has witnessed serious deterioration in internal law and order and budget management.

"At the beginning of 2005, when Abu Mazen was elected president, we hoped for new momentum in the direction of governmental reforms and the fight against corruption, and in legislation - the most essential steps for encouraging private investments," explains the senior representative of the World Bank. Arafat died, but everything pertaining to the corrupted system of government, the "Arafatism," is still alive and kicking, Roberts says. "Arafat created a system that was tailored to a liberation movement, but not for a state at a time of reconciliation. We did not think that becoming accustomed to new norms would take so much time."