Euro Journal

A New Deal for Palestine’s Financial Situation

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After the COVID-19 economic blow and Israel’s latest war, it’s critical to boost the Palestinian economy. IMF should acknowledge Palestine’s economic development over the past quarter-century, and provide it a financial New Deal with improved status to begin with.

THE CITY OF JERUSALEM It is now up to us to secure a realistic road toward peace, now that the current Israeli-Palestinian clashes in Gaza and the West Bank have been put to rest. In order for Palestine to have any chance of success, the Palestinian economy must be built, and the international community must remain engaged. Palestinian economic management has fortunately done more than the rest of the world has recognised, and it is capable of tackling the reconstruction and development tasks of the present.

Twenty-five years of Palestinian state-building efforts have resulted in a healthy public sector budget, which is one of the most important economic successes. Doch a chronic socioeconomic crisis, the COVID-19 pandemic, political stalemate, and the recent escalation of Israeli-Palestinian tensions threaten this progress. With President Joe Biden’s administration seemingly ready to take advantage of the new political balance emerging between the parties and in the region, international

financial institutions, and the International Monetary Fund in particular, must do their share to assist Palestine.

Despite a volatile macroeconomic and political climate under occupation, the Palestinian National Authority has been able to provide a wide range of services to ensure public security, social cohesion, and a functioning market economy. PNA’s solid fiscal governance has maintained aggregate demand and critical services despite the pandemic’s socioeconomic impact. The PNA budget still distributes roughly 30% of its spending to Gaza, despite not being in power there.

But the Palestinian National Authority (PNA) has endured recurrent Israeli sanctions, most recently in 2019 and again in 2020. The Israeli authorities control the Palestinian customs and trade-tax revenues and have left Palestine to its own devices when it comes to its financial relations with Israel. When it comes to Palestine’s unstable healthcare system and shattered business sector, there’s no quick remedy in sight this time around as pressure mounts

As a result of the establishment of the Palestinian National Authority (PNA) in 1994, international financial institutions have grown deeply rooted in Palestine. International Finance Corporation (the World Bank’s private-sector lending arm) has issued loan guarantees for business development. For all practical purposes, Palestine behaves as a national government when dealing with the United Nations and other organisations, and claims the label of “state under occupation.” The country’s standing among prominent multinational economic institutions, however, hasn’t improved in 27 years.

PNA, unlike other governments, is not represented in the governing bodies of international institutions, despite its strong involvement in Palestine’s most crucial economic development issues, according to the organisation. Furthermore, it is not eligible for IMF support for distressed economies, even though Palestine would qualify.

 

When it comes to Palestine’s economy and public finances, the IMF’s assessments to the donor community in recent years have progressively accommodated Israel’s security stance. Although the Fund is aware of Israel’s economic barriers and its control over Palestine’s trade, borders, and natural resources, it often ignores their structural impact on the Palestinian economy’s progress. To put it bluntly, IMF reports ignore the fact that Israel colonised and occupied Palestine.

There must be an end to the imbalance and inequity in the IMF ‘s relations with Palestine To this aim, the Palestinian National Authority (PNA) has regularly requested meetings with the successive managing directors of the Fund to discuss how Palestine might achieve its legitimate autonomous standing within the organisation, instead of being viewed as an appendage of the Israeli desk. This structure allows for unprecedented levels of interference in Palestinian public finances and colonial diktats on the part of the occupier authority

Although the IMF has helped construct the Palestinian fiscal system, 10 years ago it was declared by the IMF, World Bank, and UN to be “above threshold” for a functioning state. In spite of this, the Bretton Woods institutions remain locked in colonial thinking.

Because the Biden administration is willing to devote political capital and US funding to reinvigorate a meaningful effort to achieve a two-state solution, the IMF now has a much better chance of doing the right thing. Biden’s progressive domestic economic policies suggest a willingness to break with failed orthodoxy. Entitlement to IMF  membership does not necessitate recognition of the “State of Palestine,” because Article II says that “countries” are eligible to join, a status that no one can deny Palestin

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