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Middle East

Saudi Arabia to grant $100m to Palestinians

The Palestinian government is struggling to cover its expenditures since Israel announced it would withhold tax revenue.
Last Modified: 17 Jan 2013 15:11
President Mahmoud Abbas has struggled to secure financial aid from Arab countries [Reuters]

Saudi Arabia will give the Palestinian government in the Israeli-occupied West Bank $100m to help alleviate a worsening budget crisis, the Palestinian president's office has said.

"The state's budget is facing a large deficit as a result of the docking of Palestinian money by the Israeli government as a punitive step after the UN recognition of Palestine as an observer state," Palestinian President Mahmoud Abbas said in a statement on Thursday.

Abbas has struggled to convince Arab countries to deliver a $100m monthly "safety net" they promised when he secured de facto UN recognition of a Palestinian state in November, prompting Israeli sanctions.

The Ramallah-based Palestinian government has been hard-pressed to pay more than $300m in monthly expenditures since Israel announced it would confiscate $100m it collects in customs taxes on their behalf each month.

Full salaries for public sector workers have not been paid in almost three months and government initiatives to increase revenue by collecting years worth of electricity and water bills from the public have been hampered by street protests.

The Saudi aid will make little progress toward lowering the government's debt of more than $1.3bn to Palestinian banks and hundred of millions of dollars in unpaid contracts to the private sector.

Amid a downturn in its construction and manufacturing sectors and with its economic prospects hamstrung by Israeli restrictions, the West Bank government has been deeply dependent on foreign aid to pay its bills.

A high of $1.8bn in foreign aid in 2008 plunged to $600m last year, with Gulf countries scaling back their giving because of increased domestic spending over two years of Arab political uprisings and the global financial downturn.

An earlier $100m gift from Saudi Arabia last July and donations from Iraq, Algeria and other Arab countries provided much of the Palestinians' foreign aid in 2012.

On Wednesday, the European Union announced some $133m in annual assistance to the Palestinians and UN aid agencies servicing Palestinian refugees, in line with previous years.

The United States continues to withhold $200m in budgetary assistance, around half the aid it delivered to the Palestinians in 2012, amid Congressional objections to their bid for statehood.

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