In a Race Against Time... The Government Works on Three Tracks to Secure Salaries

Report SadaNews - Amid an unprecedented financial crisis, the Palestinian government is racing against time to secure a portion of the salary for the month of July.

SadaNews has learned from an informed source that the cash flow available to the Ministry of Finance at present is insufficient to disburse a portion of the salary, but the government is working on three different tracks to secure the necessary payment for disbursement before the end of this week. The first track is to submit a request to the Palestinian Monetary Authority for facilities worth $200 million. The second track involves accelerating the transfer of international aid, both previously approved and those discussed at the donor conference recently held in New York. The third track is to create a channel with the Israeli side to release confiscated tax revenues. However, which of these tracks is the closest to securing a portion of the salary as soon as possible?

Regarding the first track, which appears to be the shortest route, SadaNews learned that the Monetary Authority will study the request from the government during a meeting of its board of directors next Wednesday. If the request is approved, there is a slim chance that a portion of the salary will be disbursed before the end of this week or the beginning of next week.

The second track, which could potentially provide better liquidity, involves ongoing talks opened by mediators with the Israeli side to release the tax revenues. However, Israeli Finance Minister Bezalel Smotrich refuses to release all confiscated funds, with the latest information indicating that the Israeli side only agreed to transfer what remains of the tax revenues from the last five months, which were not transferred after deducting allocations for the Gaza Strip, and allocations related to the salaries of prisoners and martyrs, amounting to about 2 billion shekels. Meanwhile, the Palestinian government insists on the release of all withholdings carried out by the occupation authorities since the events of October 7, 2023, concerning allocations for the Gaza Strip, which amount to about 4 billion shekels.

The same source confirmed that discussions are still ongoing to pressure the Israeli side to release all funds, but he denied circulating claims via some platforms of an Israeli agreement to release the tax revenues.

If these discussions succeed and lead to an agreement on the release of tax revenues related either to the last five months or to those linked to the Gaza Strip allocations, this would inevitably lead to higher salary disbursements.

The source indicated that the possibility of success in this track before the end of the week is present but not guaranteed. It is worth noting that the withheld tax revenues at the Israeli side exceed 10 billion shekels, in addition to the funds withheld during the last five months.

The third track concerns accelerating the arrival of donor funds. A transfer from the World Bank amounting to $95 million is expected, but the procedures for transferring it may take several days, possibly extending to next week. Additionally, a payment of €40 million from the EU grant can be secured, as well as expedited assistance from France for €8 million and Norway for $5 million. If this track succeeds in securing the necessary funds without success in the other two tracks soon, it would mean a portion of the salary can be disbursed, although it likely wouldn't be this week.

The Palestinian government recently held a technical meeting with donors, which it described as positive, during which the need to expand the emergency fund announced at the New York conference was emphasized, meaning it should include other countries and allocate additional amounts. SadaNews learned that this meeting decided to target more donors for the emergency fund, instead of the current 17 donor entities, whereas only five donor entities were present in recent years, indicating a breakthrough in mobilizing funds from donors.

The government and donors agreed during the meeting not to settle for the amounts allocated at the New York conference, which totaled $198 million. Instead, efforts will be made to secure additional funds, with some countries pledging not to limit themselves to the aid announced at the conference but to declare additional payments, though their amounts have not yet been specified, nor whether they will be monthly or not.

The source confirmed that the meeting agreed to expedite the procedures for the transfer of grants, which pass through several channels, including direct support and others through the World Bank mechanism, and a third via the International Union mechanism, each with its specific procedures. However, he reduced the likelihood of securing any of these aids during this week.

The Saudi Foreign Minister announced the launch of the "International Emergency Coalition to Support the Palestinian Authority's Budget" in partnership with several countries, stressing that "this support does not absolve Israel of its responsibility to transfer all Palestinian financial revenues immediately and to cease its destructive practices."

The Palestinian Authority has requested monthly support of $200 million, approximately $1.2 billion for six months, to enable it to meet the minimum of its obligations amid the severe financial crisis it faces, against the backdrop of the Israeli occupation's refusal to transfer the monthly tax revenues, which account for about 68% of the total public treasury revenues.

The Palestinian Authority needs about $400 million monthly to fulfill its obligations, whether to pay salaries, operating expenses, or public debt service. Despite the three paths the government is taking to secure a salary payment, none of them has yet materialized on the ground. Therefore, the timing and amount of the salary disbursement remain uncertain, despite serious efforts to provide the necessary liquidity as quickly as possible in an attempt to disburse a portion of the salary before the end of this week or the beginning of next week.

Additionally, the percentage of salary disbursement based on current data remains unknown, as this matter will be resolved after confirming the available liquidity from the three tracks. However, the 60% threshold is the likely minimum (3,000 shekels), unless a breakthrough in tax revenues is announced soon, which is not impossible but may not be close.