Economic growth in the West Bank will be lower than expected this year because donors to the Palestinian government have not transferred the money they pledged, according to a report Monday from the World Bank.
Real economic development is also hampered by Israeli restrictions, the report said, and the Palestinian economy continues to rely heavily on money from donors. When that money doesn't come through there is an "immediate impact," the report said.
The Palestinian Authority, the Western-backed government that wields partial control in the West Bank, says the U.S. and European countries have met their commitments, but Arab countries have not.
In the first half of this year Arab donors provided less than $80 million, compared to $231 million last year and $462 million the year before, the World Bank report said.
The report said the Palestinian Authority has made significant progress in creating institutions in the West Bank as part of a plan to establish an independent state. Those institutions now "compare favorably to other countries in the region and beyond," according to the report.
However, the Palestinian Authority now faces "an acute fiscal crisis" that could undermine the "promise of these institution-building measures."
Projected growth for 2011 has been downgraded from 9 to 7 percent, the report said.
"Ultimately, in order for the Palestinian Authority to sustain the reform momentum and its achievements in institution-building, remaining Israeli restrictions must be lifted," the report said. Palestinians complain that Israeli roadblocks and checkpoints restrict movement of goods and people.
The Palestinian Authority is planning to ask the U.N. to recognize a Palestinian state later this month.
The significance of the move is largely symbolic.
It will not end Israel's overall control of the West Bank.
The Palestinian territories also are split between two rival groups, with the Palestinian Authority in power in the West Bank and the militant organization Hamas ruling the Gaza Strip. Attempts at reconciliation between the groups have failed so far.
Israel and the U.S. say a Palestinian state must be created through negotiations, and the U.S. administration says it will veto the move in the Security Council.