IMF denies Israel’s request for loan to help struggling PA / Andrea Nadel

Jul 5 2012
The International Monetary Fund (IMF) has denied Israel’s request for a loan to assist the cash-strapped Palestinian Authority (PA).

Conflicting numbers have been reported regarding the precise amount of the loan that Israel requested, with some news outlets reporting that it was for US $1 billion and others reporting that it was for US $100 million. Regardless of the exact amount, Israel’s request highlights not only its interest in preventing the collapse of the Palestinian economy but also the precariousness of the funding situation the PA currently faces thanks to a global economic downturn that has decreased the ability of donor countries worldwide to make good on their funding promises.

Moreover, as Lebanon’s Daily Star highlighted, one major reason for PA financial woes is that “pledged funds from Arab nations have failed to materialize, leaving the government unable to pay wages and bills.”

For all of the posturing in the Arab world about a supposed deep commitment to the Palestinian cause, it appears that the Arab states are again leaving the Palestinians in the financial lurch. This isn’t the first time it’s happened – US President Obama diplomatically scolded the Arab states for their failure to fulfill their pledges to the PA two years ago. And despite all the rhetoric so popular in and beyond the Arab world about Israel’s terrible supposed war on the Palestinian people, it is Israel that is now taking on considerable risk in order to try to help the PA.

According to Ha’aretz, Bank of Israel Governor Stanley Fisher made the request, with Israeli Prime Minister Benjamin Netanyahu’s blessing, to the IMF on behalf of PA Prime Minister Salam Fayyad. Fayyad made the PA’s predicament clear:

“Fayyad explained to Fischer that the euro crisis in Europe and the financial crisis in the United States made it impossible for Western nations to increase their financial assistance to the PA. At the same time, Arab states were not transferring funds that they had promised, and Palestinian banks were refusing to extend any more credit to the government due to its inability to make debt payments.”

Despite Israel’s effort to secure the badly needed funds for the PA, the IMF denied the request. Lebanon’s Daily Star reports that the IMF’s justification for doing so was that it did not want to set a precedent of providing funding to non-state entities, even though Israel would have been responsible for repaying the loan to the IMF (Israel would lend the PA the IMF money, and the PA would repay Israel). The PA is not a state and so was not deemed eligible for the loan.

In a sign of how dire the situation is, PA Labour Minister Ahmed Majdalani is quoted in the Times of Israel saying that

“What is available to the Palestinian Authority at the moment in terms of funds is not enough to pay government employee salaries this month, with Ramadan approaching … It is not sufficient to pay the bills that the Palestinian Authority owes to private companies.”

Moreover, Majdalani reported that the PA is experiencing its worst financial crisis since it was founded in 1994.

Middle East analyst Elliot Abrams points out the apparent irony in these most recent events, particularly in some of the coverage that this story has gotten in the Middle Eastern press:

“That ‘Occupied Jerusalem’ dateline [in the Daily Star’s report] is a reminder that Israel is trying to assist the Palestinian Authority despite the attacks on it from Arab capitals and much of the world’s news media. The IMF may have been right to refuse this particular step, but it would not have been necessary to try it had more aid from Arab states been forthcoming. So in this tale the Palestinians get nothing, Israel gets no credit for its efforts, the Arab oil exporters keep their money, and the only thing that continues to flow is an endless stream of denunciations of the Jewish State. Despite all that is new in the Middle East, some things never seem to change.”

Whether or not the upheaval in the Middle East will prevent Arab governments from making good on their funding promises to the PA, a financially secure PA is in the interests of anyone who genuinely supports a two-state peace. The PA’s ongoing economic instability helps no one and only casts additional uncertainty over the future, at a time when the region is already so unsettled and unpredictable.