Arab and EU aid still not enough to keep Palestine functioning

Dubai: Arab states and the European Union have responded to a dire fiscal outlook in Palestine with some $900 million in foreign aid this year.

Salam Fayyad, former Minister of Finance for the Palestinian National Authority, said foreign aid will nearly triple this year, after the embattled government received $350 million in aid in 2005.

The aid poured in to respond to Israel withholding revenue it owes Palestine as part of a collection agreement, Fayyad said, who was in town for the Arab Strategy Forum.

Fayyad, who left office one year ago, said that the funds would still not be enough to meet the government's budgetary needs.

In 2005 the Palestinian Authority's budget was $1.9 billion.

"Notwithstanding the sharp increase in foreign assistance, it's difficult for me to see the government being able to fund operations through the same level as last year," he said.

The lack of government funds has meant the PNA reduced essential services such as health and education, leading to a strike by unpaid workers in both sectors.

A lack of government spending has also dealt a vicious blow to the economy, which relies on government expenditures for as much as 35 per cent of GDP.

"When you have a withdrawal of government stimulus at a rate that this is happening, that is really what is causing the econ-omic decline," Fayyad said.

The former minister said funds from Arab nations, particularly the GCC, picked up dramatically this year and funding from the EU tripled.