Bankrupt Hamas government unveils austerity package

Date: 04-06-06

RAMALLAH, West Bank (AFP) - The Hamas-led government, bankrupt and boycotted by the West, called for emergency aid to pay last month's salaries, introducing austerity measures to slash public spending.

"We are hoping to receive emergency aid to overcome the Palestinian Authority's budget deficit and to pay the salaries of its civil servants," finance minister Omar Abdelrazek, himself a Hamas member, told AFP.

He said the Palestinian Authority employs around 140,000 civil servants and security service personnel, together accounting for a monthly salary cheque of 118 million dollars.

"We are expecting aid from Arab and Islamic countries, and friends. We have had promises of aid worth nearly 80 million dollars and I hope they will reach us quickly because we don't have money to pay the salaries," he said.

As part of a series of sanctions imposed in the aftermath of Hamas's election win, Israel has since February stopped transferring customs duties it previously collected for the Palestinian Authority.

Abdelrazek told AFP his ministry was working on a package of austerity measures in a bid to slash public spending and shoring up efforts to secure alternative sources of foreign funds.

"The finance ministry is working on a plan to find alternative aid and to reduce public spending. We have started to reduce the number of civil service cars, housing and travel expenses," he said.

The Palestinian Authority has already been in the grip of financial crisis for months and is heavily dependent on foreign aid receipts.

The European Union and United States have threatened to slash aid to the Palestinian Authority unless there is a radical change in the platform of Hamas, which is considered by both as a terrorist organisation.

On Wednesday, prime minister Ismail Haniya told the first regular meeting of his ministers that his government was in a financial crisis and he would struggle to find the money to pay government employees.

"We inherited a situation in which we not only have no money in the treasury but a whole load of debts," he said.

Abdelrazek said that the Palestinian treasury has run up bank debts totalling 640 million dollars and owes another 625 million dollars to other institutions.

He said the financial crisis could be temporarily alleviated if Israel unblocked around 200 million dollars owed to the Palestinian Authority in the form of tax and customs duties on goods that transit through its territory.

"If this money was released, we could pay the most urgent bills," he said.

"My policy depends on reducing expenses and dependency on foreign aid and increasing sources of domestic revenue that will grant us a way out," the finance minister said.

The Palestinian budget for the period ending March 31 relied on 1.7 billion dollars of aid receipts.

The World Bank warned in a report published in February that the Palestinian Authority's fiscal situation has become increasingly unsustainable, mainly as a result of uncontained government spending, particularly a ballooning wage bill.

Last month, the same institution warned the Palestinian economy risks imploding from the Israeli crackdown and threatened cuts in foreign aid.

In the worst-case scenario, it said in a report for donor countries, unemployment among Palestinians will nearly double to 40 percent this year and more than two-thirds will sink below the poverty line.

A former World Bank expert told AFP that the Palestinian public wage bill had increased by 140 percent in the past three years from 48 million dollars to a staggering 118 million dollars a month.

Although Hamas has insisted it will not be "blackmailed" by the West and Israel, efforts to draw alternative funding have so far failed to bear fruit.


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