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Gaza economy on the 'verge of collapse' as the international community fails to deliver on aid promises

May 28, 2015 at 8:58 am

Today in Brussels, the World Bank will present its devastating report on the economic situation in Gaza before the bi-annual meeting of the ad hoc liaison committee, a forum of donors which coordinates international donor support for the Palestinians. The report comes almost a year since the beginning of the last war in Gaza.

Released late last week, it is a depressing read. It states that Gaza’s economy is on the “verge of collapse”, with the coastal enclave suffering from the highest rate of unemployment in the world. It also says that Gaza has been “tremendously damaged” by the repeated armed conflicts, the blockade and Palestinian political divisions, which have all caused its economy to be “reduced to a fraction of its estimated potential”.

The report estimates that Gaza’s GDP would have been four times higher than it currently is if it weren’t for the lethal combination of the multiple conflicts and restrictions. The closure of the Egyptian tunnels and the latest war has shaved USD460 million off the Strip’s output, while the blockade which has been in place since 2007 has shaved 50 percent off Gaza’s GDP, according to the report.

It goes on to say that the economic decline has had a severe impact on the livelihoods of Palestinians, particularly in Gaza. On a per capita basis, the Palestinian economy is estimated to have declined by 3 percent in 2014. Overall unemployment has increased to 27 percent and youth unemployment in Gaza had soared to more than 60 percent by the end of 2014 – the highest in the region. Gaza’s total real GDP is only a couple of percent higher now than it was in 1994.

The key to bringing an end to this cycle of war and human suffering is to rebuild Gaza’s economy. The reports states three issues that must be tackled to make this a possibility. Firstly, it says that there must be a unified Palestinian government. The blockade on the movement of goods and people must also be lifted in order for “Gaza’s tradable sectors to recover”. There must also be substantial donor support to rebuild Gaza’s infrastructure and homes

In October at a conference in Cairo the international community banded together to provide this kind of sustainable donor support. Countries promised $5.4 billion of aid to help Gaza rebuild following the summer war. The World Bank is leading a stocktaking exercise to assess the disbursement and implementation progress of the support pledged at the conference.

Sadly, the report highlights that countries have not stood by their pledges. Although $5.4 billion was the figure widely publicized, only $3.5 billion of it was actually allocated to Gaza. As of late April, donors had given only 27.5 percent of this figure, or $967 million. However, only 35 percent of the aid pledged – or $1.2 billion – was actually “fresh”, with the majority coming from reallocated donations and emergency funding delivered as the bombs were still falling, according to IRIN. Of this new aid, just 13.5 percent – or $165 million – has come through.

States that pledged most have failed to follow through. Qatar has delivered just 10 percent of the $1 billion it promised. Saudi Arabia, Turkey and Kuwait between them have handed over just over $50 million of the $900 million they pledged. The World Bank had no data on the United Arab Emirates’ $200 million, while 84 percent of the United States’ $277 million pledge has been delivered. The European Union’s $348 million has a 40 percent delivery rate.

The World Bank’s report highlights the desperate situation in Gaza-a result of the repeated armed conflicts, the strangling blockade and the internal divisions that plague Palestinian politics. It paints a bleak picture, with rising rates of unemployment and a real GDP that remains almost exactly as it was 20 years ago. This situation has been worsened by the recent war. The Cairo conference pledges promised to help rebuild Gaza in order to limit the lasting impact of the war. This report also highlights the international community has failed Gaza, yet again.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.