World Bank urges Palestine to make fiscal reforms

29 Sep 15

Palestine has the capacity to put its public finances on a more sustainable footing, despite three years of continually weak economic growth, the World Bank has said.  

In its Economic monitoring report to the ad hoc liaison committee, published today, the World Bank said that, due to population growth, real GDP in Palestine has been shrinking since 2013. Unemployment remains high, particularly amongst Gaza’s youth, where it exceeds 60% and 25% of Palestinians currently live in poverty.    

The Palestinian economy has been in recession since 2014. Last year economic growth in the Occupied Palestinian Territory contracted to 0.4%, its first recession since 2006. The country’s economy has been severely impacted by reduced donor aid, war, suspension of revenue payments and ongoing restrictions by the government of Israel, the bank noted. 

But the World Bank said the Palestine had the capacity to bring in reforms putting public finances on a more sustainable footing. It could also create adequate fiscal space to increase the current low levels of investment in public infrastructure and enhance service delivery.

There is potential to substantially increase tax collection in Gaza once the Palestinian Authority takes charge of tax collection efforts there, while a reduction in the public sector wage bill could lead to large savings of up to 5 percentage points of GDP.

Steen Lau Jorgensen, World Bank country director for West Bank and Gaza, added: “Addressing some inefficiencies in the public health spending, for example, could generate savings that could be used to reduce the deficit or to invest in the quality of public health services.

“The persistence of the current volatile reality increases anxiety and uncertainty, overshadowing the ability of Palestinians to perceive a brighter future. Economic development measures could serve to build confidence towards a diplomatic horizon that is desperately needed on both sides.” 

  • Judith Ugwumadu
    Judith Ugwumadu

    Judith writes about public finance, public services and economics across Public Finance International and Public Finance. She previously undertook reporting stints at Financial Adviser, Global Security Finance and The Sunday Express.

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