Palestinians urge Arab states to meet financial pledges

Ramallah: Arab states have cut financial aid to the Palestinian Authority (PA) so far this year, according to PA figures seen by Reuters, and the UN has warned of a looming Palestinian cash crisis.

"The Arabs are not paying. We urge them to meet their financial pledges," said Saleh Rafat, a member of the Palestine Liberation Organisation's executive committee and one of the few Palestinian officials willing to speak out on the matter.

Arab government officials contacted by Reuters declined to comment on the issue.

The failure of some wealthy Arab states to pay up is frustrating Western governments, which are big contributors to the Palestinian territories, and leaving officials in the West Bank with a budget headache.

Some Palestinian officials speculate Arab states might be withholding the cash to try to persuade the Palestinian factions Fatah, which controls the West Bank, and Hamas, which controls Gaza, towards reconciliation.

Palestinian Finance Ministry figures seen by Reuters showed that PA had received $583.5 million in budget support so far in 2010. Only 22 per cent came from Arab donors, the rest coming from international donors including the EU and US.

In the last three years, the most Arab states have paid in any one year was $525.9 million, contributed in 2008, the figures show. Saudi Arabia and the UAE have been the main Arab contributors since 2007.

A UN report this week said the Palestinian Authority "will face a serious liquidity crisis in September and will have difficulty paying August salaries" due to the aid shortfall. PA officials said August wages were secured.

Aid is crucial in helping pay the wages of 148,000 PA employees including 67,000 in the Gaza Strip, whose salaries support a Gazan economy that has withered under an embargo imposed by Israel since the Hamas group rose to power there.

Palestinian policymakers say donor support has been one of the main engines of strong economic growth in the West Bank, estimated at up to 8 per cent this year.

Prime Minister Salam Fayyad, midway through a two-year plan to build the institutions of a future Palestinian state, warned recently of "serious financial difficulty" and said the PA faced "a significant shortfall in external assistance".