Palestinian security agencies consumed 31 per cent of the 2011 GDP of the Palestinian Authority and their officials outnumber those employed in the education and health sectors, research conducted by the Palestine Economic Policy Research Institute (MAS) has found.
While the PA general budget is nearly bankrupt, with public sector workers not receiving their salaries for two months, the findings of the research affirmed that the security apparatuses have become a heavy financial burden.
MAS economic researcher Ahmed Izzat Qabajeh told UK-based newspaper Al-Quds Al-Arabi that the proportion spent on security is very high even though, it is claimed, there is no need for so many security officials in the Palestinian territories.
Qabajeh's research reveals that 64,687 people are employed by the Palestinian National Security, Protective Security, General Intelligence, Civil Defence, Presidential Guard and Military Intelligence agencies. The total number of all non-security civil servants is 88,366. He called for a review of the needs of the Palestinians in terms of security.
"Just 11 per cent is spent on health," said Qabajeh, "with 19.4 per cent going towards education; social services takes up 43 per cent."
The study to be published by MAS is based on data taken from the website of the Palestinian Ministry of Finance. "Spending on security reached £514m from January to October 2011," he added. "Most of this, £395m in fact, was spent on salaries." Security spending dropped slightly in 2011 from 32 per cent in 2010.
In going through some of the issues which undermine the PA's ability to solve its financial problems, Qabajeh conducted a thorough analysis of the PA's budget since 1994/5. He divided the period to-date into five financial stages.
The first stage from 1994 to 1999 saw operational expenses more or less financed by domestic revenues. However, there was a decline in budget surpluses in 1998 and 1999.
The second stage from 2000 to 2002 witnessed economic and social indicators affected by the difficult political circumstances and the economic siege during the second Intifada. That included the absorption of those made unemployed from the civil and military government sectors.
Consequently, expenditure levels increased and revenue either froze or decreased. That situation aggravated the problem of the deficit.
From 2003 to 2005, despite the introduction of financial reform, the PA's expenses continued to rise due to the implementation of the financial aspects of the civil service law and an increase in the number of employees to 146,000.
The fourth stage, from 2006 to 2007, is considered to be one of the hardest periods for the PA. It could not pay employees' salaries when Israel stopped transferring the tax revenues it collected at border crossings on behalf of the authority. In addition, a number of international donors stopped their financial aid to the government formed by Hamas, even though the Islamic movement won a free and fair democratic general election in 2006.
Finally, from 2008 to 2011 the rate of revenue increased because of the improvements on tax management and the increase of foreign assistance. That led to a decrease in the deficit in 2008 and 2010. Despite those improvements, the main problem, the study claims, was not resolved because the monthly expenditure exceeded income, and foreign aid and tax revenue were not guaranteed.
While the PA's income is split roughly into that from taxation and non-taxation sources, the former is divided into direct and indirect revenue. Indirect income, such as VAT, customs duties and fuel tax, is the biggest source for the PA treasury, although international reports suggest that the PA treasury loses about $0.5 billion each year due to tax evasion and smuggling. Income tax accounts for just 7 per cent of the PA's revenue thanks to tax evasion on a massive scale and low income levels generating low taxes.