US Threatens To Cut Palestinian Aid

VOL. XLV

No 27

8-July-2002

PALESTINE

US Threatens To Cut Palestinian Aid

US President Bush’s national security advisor Condoleezza Rice has warned that the US would cut off aid to the Palestinian Authority (PA) if Yasir 'Arafat is reelected in the coming elections scheduled for January 2003. Echoing President Bush’s charge of corruption against the PA Ms Rice said: “I don’t think anyone wants to give assistance to a leadership where we don’t know what’s happening to the money. We see no reason to put that money into hands where it might be misspent.” Last year the US disbursed $114mn to Palestinian aid projects through the UN (via UNWRA), the World Bank and NGO’s. The US is currently UNWRA’s largest single donor and has promised an extra $30mn this year in addition to providing $80mn for the agency’s general fund of $300mn for 2002.

If Mr 'Arafat is indeed reelected and the US cuts its aid to the PA this would have serious repercussions for the struggling Palestinian economy. According to Palestinian Finance Minister Salam Fayyad who is part of the new reform cabinet, the PA is currently suffering a monthly shortfall of $20-30mn needed to pay salaries and provide basic services. Unemployment among Palestinians is running at about 60% and almost half of all Palestinians live below the poverty line. People have been drawing on their savings to get by, but the longer the current conflict continues the more desperate the situation will become. This was illustrated recently by the demonstration by 5,000 unemployed Palestinians who marched on the PA headquarters in Gaza City demanding jobs and food. They too accused the PA with misappropriating aid donations, chanting “Where are the millions?” They also demanded that the PA set up an employment fund.

President Bush has, however, offered the Palestinians a carrot by pledging that the US would lead international efforts to assist a reformed PA with economic and development aid. “The United States, the international donor community and the World Bank stand ready to work with the Palestinians on a major project of economic reform and development”, he said, adding that the US, the EU, the World Bank and the IMF “are willing to oversee reforms of Palestinian finances, encouraging transparency and independent auditing”. Meanwhile, international aid agencies have accused Israel of obstructing their operations and preventing them delivering humanitarian aid to Palestinians. The Israeli army has responded that the movement of people and goods is restricted due to security concerns but that it is working continuously to help the delivery of aid.