Seeking a bypass, as the money runs out

[Winslowalrob]

Aid to the Palestinians

Seeking a bypass, as the money runs out

May 11th 2006 | GAZA

From The Economist print edition

The Quartet moots a way of mitigating Palestinian hardship. But nobody knows how, or whether, it is going to work

AP

EVER since March, when foreign donors first began cutting aid to the Palestinian Authority (PA) in the wake of Hamas's election victory, their refrain has been that they did not intend to punish the Palestinians personally. This week they acknowledged that the punishment was happening anyway. The so-called Quartet (America, the European Union, Russia and the UN) has proposed a “temporary international mechanism” to avert a humanitarian disaster by sending aid directly to the Palestinian people. The unspoken assumption is that this scheme will restore at least some of the money for PA salaries, while bypassing Hamas, which the donors do not want to deal with until it meets the Quartet's conditions of recognising Israel and renouncing violence.

Some 29% of the Palestinian population depend on PA salaries, and they have gone largely unpaid for two months. The effects are clearly visible. In Gaza City, the rush-hour traffic jams are a shadow of what they used to be. Shopkeepers and stallholders on the usually bustling Omar Mukhtar street stand idle, except for the jewellers who field steady trickles of people wanting to sell wedding rings and family silver. Vegetables and fruit are starting to rot as customers hoard their cash.

There are shortages of fuel—which will only increase now that the Israeli provider to the PA has suspended supplies because it had not been paid—and also of dairy products and medicines, largely because, since the start of the year, Israel has kept the Karni goods crossing-point between it and Gaza closed almost as often as it is open. The crossing has been targeted by terrorists, and the PA, under Israel's instructions, has been digging for alleged tunnels there. So far it has found nothing.

The world's blockade of the PA has hit harder and quicker than anyone expected. In March, the World Bank predicted cuts in aid, trade and the number of work permits for Palestinians in Israel, and forecast that Palestinians' average incomes—already low in the wake of the intifada—would fall by another 30% this year alone. In fact the cuts have been much deeper than foreseen, and banks are caving in to American pressure not to send the PA money from other sources. In a report this week the bank says that even its original gloomy forecast now looks “too rosy”.

Locals say they are still a few weeks away from running out of money altogether. But PA institutions are showing the first signs of shutting down. Some departments have told staff they need not turn up or can work from home. Gaza's state-run university has closed its doors for a week. Grant Leaity, the field co-ordinator for Médecins Sans Frontières, worries that “nurses will be among the first people to look elsewhere for jobs”.

That would cripple the Health Ministry, the main provider of health services, which was already running out of some medical supplies because a big funding programme from the World Bank expired last year. This week four kidney patients in Gaza were reported to have died for lack of dialysis. Another immediate risk is that rival clans and political factions with influence over the various bits of the PA's security services will stoke the unrest already felt by unpaid and disgruntled members.

If the PA stops functioning, says the World Bank, the result will undo years of institution-building. The bank gives warning that the crisis “could lead the public to look for basic services, such as education, from informal and less secular providers.” It adds that “institutional paralysis could also increase calls by the Palestinian public for wrapping up the PA and handing administrative responsibility back to Israel.”

Israel definitely does not want that. It welcomed this week's Quartet proposal. But the mechanism for providing aid is still a pretty vague notion. One idea is to channel the wage money through the office of the president, Mahmoud Abbas, who is not from Hamas. But most people agree that his office simply lacks the capacity to handle it. Another is to set up a trust fund with an independent payments agent, as was done in the mid-1990s when the PA began. But that could take precious time. A third is to beef up the World Bank's existing Emergency Services Support Programme, which provided the Health Ministry money that ran out last year.

Equally unclear is how much money, and for what, the donors actually want to give. If the total sum is not enough to cover the whole of the PA's bloated payroll, who—other than the PA itself—can decide which salaries really need paying? And will it cover anything besides wages? More than half the Health Ministry's budget, for instance, goes on expenses like fuel, medicine and equipment. Without them, paying the nurses will do little good.

In any case, the bank says, there is not much point in a bypass mechanism unless Hamas itself agrees, and so far its reaction has been hostile. It is almost equally important that Israel, too, gives way, by releasing the $55m-60m a month in tax and customs revenue that it collects on the PA's behalf but has been holding in escrow since February. On May 10th Israel said it was willing to release 50m shekels ($11m) through a Quartet mechanism for humanitarian uses, but not towards the $95m monthly wage bill.

As the Palestinians wait for help, Israel continues to pound the northern Gaza Strip with up to 300 artillery shells a day, in response to rocket fire from Palestinian militants. While the militants' crude rockets have done virtually no damage in Israel, the shells, though usually aimed away from populated areas, do damage houses, and injure and occasionally kill people with their shrapnel. The continuous thud of shelling, audible several miles away in Gaza City, puts everyone even more on edge than they were already.

http://www.economist.com/world/africa/displaystory.cfm?story_id=6919123

No easy answers to such difficult questions, but I hope this wackitude gets resolved soon.