As Israel continues to withhold taxes which are due to the Palestinian Authority the International Monetary Fund has just announced that the Palestinian economy fell into actual decline last year for the first time since 2006. Unemployment has now risen to an average of 27% across the occupied Palestinian territory (oPt).
Much has been written over recent years about the 'economic boom' in the West Bank, at the heart of which is the PA stronghold of Ramallah. Development today continues at pace with new apartment blocks been built across the city and new malls springing up encouraging the masses to spend. House prices in many parts of the city are equal or even higher than those in several parts of Europe and under ongoing economic policies launched in-depth during Salam Fayad's tenure as Prime Minister these prices are propped-up by bank loans that have become more accessible than ever before.
Palestinian development and even basic infrastructure without Israeli permission in the more than 60% of the West Bank that is classified as 'Area C' is impossible. East Jerusalem remains under full Israel control on all levels and Gaza remains at the whim of devastating Israeli bombing campaigns as was highlighted by the horrific events of last summer.
Within the fragmented bubbles – known as 'Area A' – that are at least on paper under PA control, the development that meets the eye can be startling. Those members of the capitalist elite who are behind such development are no doubt benefitting significantly in financial terms from the situation, whilst those seeking housing and others basic needs, the masses indebted to banks, are of course the victims of this enterprise.
Away from the elite, the wider economic situation in Palestine remains fully dependent on international funding and the monthly payment by Israel of PA taxes. Since Abbas move to join the ICC Israel has withheld taxes which amount to about $127 million. Payment of these taxes is fully dependent on PA acquiescence to Israeli demands at the head of which is the demand for the continuation of the political status quo. The taxes amount to about two thirds of the PA's monthly income excluding foreign aid.
Israel's continued withholding of taxes may be the needle that bursts the bubble if it continues as Benjamin Netanyahu recently promised it would. This tactic has been used several times by Israel although rarely for longer than a month or two. However, following Hamas' victory in the 2006 elections Israel withheld taxes for 6 months. The 2006 blockade and its supporting international blockade of the Hamas government brought the oPt to a virtual standstill and eventually brought the government down.
On Saturday in Gaza, a 30 year-old man was reported to have set himself on fire. Witnesses said that they believed the dire economic situation was the motivation behind this desperate move.