World Bank Warns Of Deepening Palestinian Fiscal Crisis

September 19, 2012

Calls for immediate donor action coupled with freeing of untapped West Bank resources

JERUSALEM, September 19, 2012 – The World Bank's latest report on the Palestinian economy warns of a deepening fiscal crisis in the Palestinian territories, calling on donors to act urgently. In parallel, the report emphasizes that only strong private sector investment will drive sustainable growth and underscores how many layers of physical, administrative and security restrictions now constrain the private sector. Palestinian access to Area C of the West Bank is a key to unlocking some of this private sector opportunity.

The World Bank published its Palestinian Economic Monitoring Report today, a document prepared twice a year to inform the Ad Hoc Liaison Committee (AHLC), a forum of donors to the Palestinian Authority (PA). The AHLC is due to meet in New York on September 23.

Entitled Fiscal Crisis, Economic Prospects: The Imperative for Economic Cohesion in the Palestinian Territories, the report highlights the untapped resources of the West Bank as a potential source of private sector growth, particularly urgent against the background of economic slowdown, reduced donor aid, and few positive prospects in the broader political environment.

Noting the damaging economic effects of geographical fragmentation, the report underscores the significance of Area C which is the only contiguous land in the West Bank, connecting 227 smaller separate and heavily residential areas. This 60% of the West Bank, which remains under full Israeli control, holds most of the agricultural lands, natural resources, and land reserves of the West Bank. Putting these resources to work can provide an economic foundation for growth in important sectors of the economy, says the report. Access to Area C has the potential to play a central role in the development of businesses such as construction, telecommunications, agriculture, and tourism.

“Donors do need to act urgently in the face of a serious fiscal crisis facing the PA in the short term,” said Mariam Sherman, World Bank Country Director for the West Bank and Gaza. “But even with this financial support, sustainable economic growth cannot be achieved without a removal of the barriers preventing private sector development, particularly in Area C.”

Sherman stressed that “the most important message of this report is that economic cohesion is not achievable when the areas in which people have to operate and go about their business are crisscrossed by impediments.”

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