The Palestinian Authority (PA) is facing fiscal difficulties. Clearance revenues (customs revenues collected by Israel on behalf of the PA and repatriated each month) have been withheld by Israel since early January 2015. The clearance revenues amount to approximately 70% of the total PA revenues. As a result, the PA has been unable to pay public officials their full salaries.

The conflict in Gaza in July-August 2014 caused an estimated US$2.8 billion in damages. Even prior to the conflict, growth had slowed  from 6% in 2012 to about 2% in 2013 as a result of political uncertainty, a reduction in aid, the ongoing restrictions on the movement of people and goods, and the collapse of tunnel activity between Gaza and Egypt.

In 2014 the Palestinian economy contracted entering into a recession.  The Gaza economy contracted by nearly 15% as a result of the conflict, whereas the economy in the West Bank grew by 4.5% in 2014, but the growth was driven primarily by new building construction. Negative growth in Gaza has had a severe effect on unemployment, causing it to go up to 43%.  The youth unemployment in Gaza is estimated at a staggering 60%.  Overall unemployment in the West Bank and Gaza increased in 2014 to 27%.

Donors’ aid for budget support has been uneven, since its peak in 2008, and the fiscal adjustments put in place to mitigate the dropping aid flows have not been commensurate.  The already difficult fiscal position of the PA was exacerbated by the recent Gaza conflict. The fiscal pressures threaten the provision of public services and the institutional development gains by the PA.

The current decline could be reversed in an environment where sustainable, private sector-led growth is fostered coupled with a commitment of ongoing financial support from the international community.   A dynamic private sector can generate the sustainable growth needed; however, restrictions put in place by the Government of Israel continue to stand in the way of potential private investment. Access to Gaza remains highly controlled, and much of Area C, which makes up 60% of the West Bank, is inaccessible to Palestinians.

Last Updated: Sep 16, 2015

The World Bank has special arrangements for assisting the West Bank & Gaza (WB&G).  In 1993, the World Bank established the Trust Fund for Gaza and the West Bank as a mechanism for funding assistance. The Bank leverages its comparative advantage by focusing on laying the foundation for a future Palestinian state, as it has since 1993: a grasp of longer term development issues, convening influence with development partners, and technical expertise.  

The program is guided by a joint World Bank Group (WB-IFC-MIGA) Assistance Strategy for fiscal years 2015-16. The Bank’s program of knowledge products and grants is focused on municipal services, energy, water and solid waste management sectors, as well as social protection and education.  A project focusing on technical assistance to the health sector was the latest to be added to the portfolio.  Along with offering a range of advisory services, IFC continues to support both existing and new clients in the West Bank & Gaza private sector. The Multi-Lateral Guarantee Agency (MIGA) has underwritten a number of projects in the power, agribusiness, and manufacturing sectors.

Last Updated: Sep 16, 2015

With support from the World Bank, the Palestinian Authority was able to achieve the following results:


Since early 2013, the Ministry of Finance’s monthly and quarterly reports have provided the full picture for each category of transfers for all units of the Palestinian Authority. The PA has worked to boost domestic tax revenues by strengthening tax enforcement and improving administrative procedures; reduced the growth of the wage bill through a zero net hiring of civil workers policy; and assisted municipalities in improving their financial and fiscal performance. The Higher Council for Public Procurement Policy has been established and staffed, and the amended public procurement law was signed by the President, with regulations adopted by the Cabinet.


Social safety net reforms, supported by the Cash Transfer Program and led by the Ministry of Social Affairs, have established an effective poverty-targeting database as well as the systematic use of the banking system to provide and monitor cash transfers. Important results have also emerged in the education, pension, and NGO sectors. The Bank is supporting NGOs to provide social services to those who are poor, vulnerable, or marginalized, and strengthening the institutional capacity of these organizations.


The World Bank has maintained a robust analytical program that has assisted the PA’s monitoring of the impact of restrictions on economic activity and promoting private sector-led growth. A recently completed Investment Climate Assessment identified constraints and drivers of growth for the private sector in the West Bank and Gaza, and provided the analytical framework for the upcoming Finance for Jobs project, scheduled to be approved at the end of fiscal year 2015.


With support from the World Bank and a number of donors, the PA has improved the institutional frameworks for, and access to, water and sanitation, solid waste management, electricity, and municipal service delivery through investments and analytical work. The Bank has helped analyze the infrastructure needs in Gaza and supported the rehabilitation of dilapidated infrastructure there. A World Bank study, published in October 2013, has analyzed the economic potential of Area C of the West Bank.

Last Updated: Sep 16, 2015

By administering a multi-donor Trust Fund (Australia, Canada, Finland, France, Japan, Kuwait, Norway, Poland, and the United Kingdom have contributed to this) the Bank has channeled funds (approximately US$1.3 billion since its inception) to support the Palestinian Authority’s budget.

Coordination with a number of donors on investment projects has allowed the World Bank to leverage funding (nearly four times the amount of Bank resources) and maximize impact on the ground.  The Partnership for Infrastructure Multi-Donor Trust Fund (PID MDTF), established in 2012 to support infrastructure projects focusing on water, energy, and urban development, has grown to eight donors (Denmark, France, Finland, Norway, Sweden, the Netherlands, Portugal, Croatia) and over US$75 million in funding. The PID MDTF was the main vehicle to channel donor funding to emergency Gaza reconstruction in water, energy and municipal sectors.

The Bank also functions as the secretariat for the Ad Hoc Liaison Committee of donors to the Palestinian Authority. The Bank submits a report prior to each meeting updating partners on recent economic and fiscal trends, and provides economic and institutional analysis. The report helps to set the agenda and frame the discussion.

Last Updated: Sep 16, 2015


West Bank and Gaza: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments