Global economic crisis: study finds Palestinian economy is teetering on the brink of collapse

GAZA – For the best part of the past 16 months, the Palestinian Authority failed to pay on time the wages of more than its 200,000 public-sector employees. The delays in salary payments are caused by delays in the transfer [to the Palestinian Authority] of emergency aid funds and Palestinian tax revenues collected by Israel on behalf of the Palestinian Authority. The economic implications of the situation are far-reaching and disastrous, argues economist Yitzhak Gal in a report prepared by him for the monthly e-newsletter Iqtisadi (September issue, published by the Tel Aviv University Moshe Dayan Center for Middle Eastern and African Studies under the heading “The Palestinian Economic Crisis: A Loud Wake-Up Call.” The situation is liable to have dangerous [social and political] consequences due to the fact that the Palestinian public-sector employees, including the security establishment personnel, account for [well] over a quarter of the Palestinian purchasing power. Their low salaries are a mainstay of economic and social stability in the West Bank. “As these salaries have not been paid on time and in full,” the report explains, “the economic security of the public-sector employees is undermined “and the shock waves spread to the West Bank society at large.” Furthermore, [many of] these public-sector employees are unable to meet bank loan repayments and the devastating effect is felt throughout the financial system. Wage levels in the Palestinian territories are evaluated with reference to the purchasing power and standard of living of the local inhabitants. The close ties with the Israeli market are reflected in similar price levels in the West Bank and Israel, in particular when it comes to the price levels of fuel, communication services and a whole array of basic food products. [Since wages in the Palestinian territories are much lower than in Israel,] the real purchasing power of Palestinian households is much lower than that recorded in Israel. Comparisons of related international data conducted by Gal show that the Palestinian GDP [gross domestic product] per capita [when adjusted to local purchasing power] is far lower than that of neighboring Arab counties, and is only slightly higher than that of the poorest countries in the region. In other words, the Palestinians’ standard of living and poverty level are similar to those found in countries like Sudan or Yemen. –Al Monitor



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