COVID-19 expenses upending PA budget formulation

RAMALLAH, West Bank —The state of emergency declared by Palestinian President Mahmoud Abbas on March 5 and the strict measures announced by the government on March 18 to stem the spread of COVID-19 in the Palestinian territories are expected to further constrain the financial capacity of the Palestinian Authority (PA). The government was expected to pay the full salary of state employees, but if the state of emergency is prolonged, a financial crisis will loom.

Two factors will contribute to deepening the PA’s financial crisis: a decrease in clearing funds (i.e., taxes and import duties) driven by a decline in trade and higher expenditures in responding to the state of emergency, such as the extensive deployment of security services in cities, amelioration of the effects of rising unemployment and increased medical costs and establishment of quarantine centers. As of April 2, there were 160 coronavirus infections recorded in the West Bank and Gaza and one death. Eighteen people had recovered from COVID-19.

Uncertainty about the costs associated with the COVID-19 crisis has in part curbed the government’s efforts to announce a general budget for fiscal year 2020, which runs a calendar year. The budget is usually released during the first quarter. The Cabinet held a second reading on it on March 15, but as of April 1 still had not held the required third reading before submitting the budget to Abbas for approval.

At a March 29 press conference, Prime Minister Mohammad Shtayyeh said that under the budget submitted to the Cabinet, government revenue will drop by more than 50%, and international aid will also decrease. Given this financial state of affairs along with the coronavirus outbreak, the government will operate based on an emergency, austerity budget. Shtayyeh estimates the government will need around $120 million to deal with the virus. “The financial situation will be difficult in the coming days,” he said, calling on Palestinians to be prepared.