Palestinian Prime Minister Fayyad warns of cash crisis

The cash crunch has gradually worsened in recent years, and the Palestinian Authority now has reached the point of not being able to pay the salaries of about 150,000 government employees, Salam Fayyad told The Associated Press. The number of Palestinian poor is bound to quickly double to 50 percent of the population of roughly 4 million if the crisis continues, he said.

“The status quo is not sustainable,” Fayyad said in an interview at his West Bank office.

The Palestinian Authority, set up two decades ago as part of interim peace deals with Israel, is on the “verge of being completely incapacitated,” Fayyad warned. Only a year ago, he said he expected to make great strides in weaning his people off foreign aid.

The self-rule government was meant to be temporary and replaced by a state of Palestine, which was to be established through negotiations with Israel. However, those talks repeatedly broke down, and for the past four years the two sides have been unable to agree on the terms of renewing the negotiations.

In late November, Palestinian President Mahmoud Abbas won U.N. recognition of a state of Palestine in the West Bank, Gaza and east Jerusalem, overriding Israeli objections to the largely symbolic step. On Sunday, Abbas asked his West Bank-based government to prepare for replacing the words “Palestinian Authority” with “State of Palestine” in all public documents, including ID cards, driving licenses and passports.

Israeli officials declined comment, including on whether Israel would prevent Palestinians with new ID cards and passports from crossing borders and checkpoints.

In an apparent response to the U.N. move, Israel in December halted its monthly transfer of about US$100 million in tax rebates it collects on behalf of the Palestinians. That sum amounts to about one-third of the monthly operating costs of the Palestinian Authority. Fayyad said he now only takes in about US$50 million a month in revenues.

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