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Palestinian Budget Forecasts $747Mn Deficit; Minister Pledges Transparency
13 January 2003 Volume 46, Issue 2 - FINANCE

Palestinian Finance Minister Salam Fayyad has presented a draft budget for 2003 to the Palestinian Legislative Council (PLC) which will vote on the proposal in about a month. The draft is the first budget for Mr Fayyad since his appointment as Finance Minister in June, and the first since 2001 as the PLC was unable to convene in 2002 due to the situation in the occupied territories. In presenting the budget, Mr Fayyad pledged to stamp out corruption and improve record-keeping, beginning what he called a new era of openness and full commitment to transparency and accountability in the management of Palestinian finances.

Draft Palestinian Budget 2003






Taxes Collected by Israel on Behalf of the PNA


Total Expenditures


Current Expenditure


PNA Contribution to Development Budget


Development Expenditures






External Budgetary Financing


 - Financing to Cover Recurrent Expenditures


 - Financing to Cover Development Expenditures


Funds Released by Israel from Stock of Frozen Tax Revenue


Expenditure Arrears (Net Accumulation)


 - Gross Arrears Accumulation


 - Gross Arrears Repayment


Domestic Bank Financing


 - Domestic Bank Borrowing


 - Domestic Bank Repayment


Financing Gap


Source : Ministry of Finance, Palestinian National Authority (PNA).

The baseline scenario for the 2003 budget assumes the continuation of current economic conditions under which GDP is forecast to decline by 7% in 2003. Revenue–generating capacity is also projected to decline to about $530mn, while external budgetary support is assumed at around the same level as in 2002 ($500mn). The budget also assumes that Israel will resume the regular transfer of the revenues it collects on behalf of the Palestinian National Authority (PNA), and that the stock of withheld revenues will be released in 2003.

According to Mr Fayyad, under these assumptions, it should be possible to fund current and capital expenditure of about $1.1bn, while eliminating the stock of budgetary arrears and significantly reducing indebtedness to the banking system. A phased approach to the reduction of arrears will be followed in the event of a shortfall in external assistance, he said.

Financial reforms envisaged under the budget proposal include: ensuring that donor funds are channeled through the PNA Treasury; achieving operational integration between different units of the Ministry of Finance; eliminating the use of cash in government transactions; reorganizing the investment and commercial operations of the PNA; strengthening the internal audit role of the Ministry of Finance; rationalizing public sector hiring policy; advancing the adoption of a modern pension system; and ensuring full compliance by all the PNA ministries and agencies with the provisions of the General Procurement Law that pertain to bidding in the acquisition of goods and services.

© Copyright MEES 2004.

© Middle East Economic Survey (MEES) 2014.
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