Palestinian Authority to cut spending on wages and electricity to access donor funds
17 December 2007
Favorable World Bank assessment of Palestinian economic reform program helps pave the way for major donor support.
Delegations from more than 90 countries and international institutions met today in Paris, pledging $7.4 billion to support the Palestinian Authority (PA). The commitments surpassed the $5.6 billion requested by the PA to finance the funding shortfall in implementing its three-year Palestinian Reform and Development Plan (PRDP), which covers the period 2008 to 2010.
In line with donor priorities, the PRDP suggests major cuts in the wage bill in the security, health and education sectors. While security represents a large part of the civil service, these reforms could also have serious impacts on teachers and medical personnel in public facilities. The proposed plan would also reduce subsidies on basic electricity costs for Palestinian customers.
These suggested spending cuts, which have received the full backing of the World Bank, could have serious consequences on the quality of life and the PA’s ability to provide basic services. While the Palestinian Authority has promised to put in place a “safety net” to protect the poorest segments of the population, the details of its plan are not clear.
Prior to the Paris conference, the World Bank released a favorable assessment of the PRDP, though the report noted that the wage bill reforms did not go far enough. The Bank also pledged $59 million of its own resources for projects in 2008, and hopes to provide at least an additional $50 million in early 2008.
In its report, the Bank also expressed its willingness to take the lead in administering a PRDP-linked Multi-Donor Trust Fund for budget support, though it remains unclear how much authority the Bank would have over the disbursal of funds.
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