World Bank warns of high risk that Palestine will suffer a “fiscal collapse”

Given the consequences that the Gaza war, The risk of Palestine suffering a fiscal collapse has increased considerably in recent months, according to the World Bank.

“The PA’s fiscal situation has worsened dramatically over the past three months, significantly increasing the risk of a fiscal collapse.”states the institution in an update of the report ‘The impact of the conflict on middle East in the Palestinian economy’.

This is because revenue streams have largely dried up due to a drastic reduction in transfers to the Palestinian Authority and a massive drop in economic activity.

“The growing gap between the amount of income coming in and the amount needed to finance essential public spending is causing a fiscal crisis,” warns the Bretton Woods institution.

At the end of 2023, this financing gap reached US$682 million and this gap is expected to double in the coming months, reaching US$1.2 billion.

Foreign assistance and the accumulation of arrears to public employees and suppliers are the only financing options available to the Palestinian Authority, reminds the Bank.

Regarding the economic outlook, the forecasts for 2024 are “very uncertain” and a new economic contraction is projected between 6.5% and the 9.6%.

The report also analyzes the different dimensions of poverty of the Palestinian people, broken down by geographical location.

The findings focus on data available in mid-2023 and show that poverty was increasing significantly before October 2023, when Israel launched the war against Gaza.

The overall poverty rate of the Palestinians was at 32.8% in mid-2023, with wide differences between the West Bank and Gaza.

In Gaza, the poverty rate was around 64%, and in the West Bank 12%. Compared to the last analysis carried out in 2017, poverty in the Palestinian territories had increased by 3.7 percentage points.

“Today, almost all Gazans live in poverty,” says the World Bank.

Nearly half a million jobs have been lost since October 2023, including 200,000 in the Gaza Strip, 144,000 in the West Bank, and 148,000 cross-border workers traveling from the West Bank to the Israeli labor market.

The research also analyzes the GDP per capita and states that in 2023 it stood at US$3,360, with a drop of 12% compared to 2022. Only for Gaza, there was a drop in 28%.

Per capita income in Gaza was about one-fifth that of the West Bank and in 2023 was the lowest ever recorded.

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