AP Interview: Palestinians to cut reliance on aid

AP News
Posted: Dec 01, 2011 12:54 PM
AP Interview: Palestinians to cut reliance on aid

The Palestinian prime minister said Thursday he wants to reduce his people's reliance on foreign aid drastically in the coming year and hopes to be able to pay for all day-to-day operations of his government by 2013.

Salam Fayyad told The Associated Press that the decision was spurred, in part, by what he described as the Palestinian Authority's worst financial crisis since its inception in the mid-1990s. The crisis was triggered by a 2011 shortfall of millions of dollars in foreign aid and Israel's decision last month to suspend the transfer of about $100 million a month in tax funds to the Palestinians.

Israeli Prime Minister Benjamin Netanyahu resumed the transfer Wednesday under intense international pressure. But his office said he might freeze the funds again, should the Palestinians take additional steps seen by Israel as an attempt to bypass negotiations, such as seeking U.N. recognition of an independent state.

Fayyad said he wants to make sure Israel won't be able to hold up the transfers again. "It is a priority for us to find a way that we can be assured of the uninterrupted flow of funds from Israel," Fayyad said in an interview at his Ramallah office. He did not elaborate.

Weaning the Palestinians off the foreign aid will be a difficult task. In 2011, such aid made up $1.5 billion of the $3.7 billion budget. However, Fayyad, said he has already made significant progress and aims to cover all running costs of the government, such as public sector salaries and welfare payments, with local revenues by 2013.

He said he hopes "to make 2012 the last year ... in which this Palestinian Authority will need any external financing to help with recurrent expenditures." Foreign aid would still be needed for development projects, he said.

Even as Fayyad lays out his ambitious goals, it is by no means certain he will remain in office long enough to see them through.

His boss, Palestinian President Mahmoud Abbas, is pursuing reconciliation with the Islamic militant Hamas, which has ruled the Gaza Strip _ one of the territories the Palestinians want for their state _ since a violent takeover in 2007.

As part of reconciliation, the rivals are to form an interim government that would prepare for elections in May. Hamas has objected to Abbas' choice of Fayyad as head of the interim government.

Negotiators are to meet later this month to revisit the issue, but Hamas officials have raised the possibility of keeping the rival governments in place until elections if no compromise is found. This would keep Fayyad in his post, at least until May.

Fayyad said Thursday that regardless of the political uncertainties, he had to try to get a grip on the financial crisis, "the deepest the Palestinian Authority has encountered since its inception."

The Palestinian self-rule government, which was set up as part of interim peace deals with Israel nearly two decades ago, is "teetering on the edge of collapse at any point of time," he said.

The billions of dollars of aid given to the Palestinian Authority were seen from the start as a way of supporting Israeli-Palestinian negotiations that were to lead to the creation of a Palestinian state. But talks have stalled repeatedly, and have been paralyzed since late 2008.

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Fayyad's pledge to slash reliance on aid comes in the context of the diplomatic deadlock and the global financial crisis. In 2011, donors didn't pay all the money they had promised or paid it late.

"Donors are on board" with his new approach, said Fayyad, who recently visited Norway, which has coordinated aid efforts. "Donors do not want to continue to advance in what they perceive to be an endless operation with continued occupation," he added.

In the 2011 budget, about $1 billion of the foreign aid went to government operating costs, such as public sector salaries, while some $500 million were spent on development projects. Fayyad noted that just three years earlier, his government still required $1.8 billion in aid for operating costs, or nearly double the 2011 figure.

Fayyad was able to decrease his deficit, in part, because of modest economic growth in the Palestinian territories, spurred in part by Netanyahu's easing of restrictions on Palestinian trade and travel. However, many restrictions persist and hamper growth.

The Palestinian prime minister said he plans to cut spending and increase revenue in 2012, including by going after tax evaders.