The PA budget and financial planning

The yearly budget of a state is considered to be a government’s approximation of what is possible in the coming year. In Palestine, it reflects the goals of the Palestinian Authority and what it hopes to accomplish within the next 12-month period. It also gives us a picture of the different capabilities of various sectors within the economic and financial branches of government, all of which have their own goals within a given year.

All of the financial sectors within the government benefit from their past experiences and from outlining their expectations in terms of growth and development. In addition, there are also questions of general spending, which include salaries, ongoing expenses, accumulating expenses, capital spending and everything in between. Each of these categories has its own range of issues and particularities. Thus, the size of such spending reflects the amount of direct and indirect tax increases that affect families, businesses and organisations that have their own responsibilities and payments that they must make.

This is our national burden and how the national budget affects the amount of taxes that our citizens pay. In the event that it becomes absolutely necessary, the government can help the people by providing support, which will vary according to the situation.

Accordingly, the budget cannot be calculated without a clear and defined vision of what the government hopes to achieve. This will include a great deal of effort on the part of the government, the financial ministry and its affiliated agencies, which must all work towards achieving the PA’s goals by implementing a series of regulations that will ensure the desired outcomes.

In Palestine, the national authority has worked towards creating its annual budget in a way that financial and economic goals will be achieved, as well as its social and political objectives.

The main financial goal of the PA is to create a sense of balance between general wishes and general spending while sparing the government from having to resort to harsh measures or to claim that there is a surplus of funds within the budget when this is not the case. This represents a classic form of political thought since the mid-eighteenth century, one that fosters the image of a limited government with limited economic activity. We must also note that this goal does not currently represent the ideal or an absolute priority because the government is forced not to comply in order to implement other priorities.

One of the main economic goals is to expedite a process that encourages economic development in both a stable and balanced way. Improving the economy is important for the government because it affects living conditions directly. In addition, a better economy would help to reduce high unemployment rates, which in itself would help to create economic stability. Achieving this along with growth would also lessen the gap between the poor and the rich in society, which is what Palestinian civil society is striving for by implementing a minimum wage. Moreover, one of the aims is to encourage the rich to work as a force within society to help alleviate the sense of malaise by setting up a welfare-type system. As for political goals, they are embodied by democratic values for freedom and working towards establishing worker’s unions in addition to establishing the necessary policies.

The Palestinian Authority’s general budget for 2016 was announced in the second half of January. It is a legal requirement for the government to announce its budget; it was announced earlier this year than in previous years, when it has come out in March. Sometimes it is even delayed further, as happened last year; this has a negative impact on the services that the government is able to provide.

The 2016 budget covers a number of issues. It has been decided that there will not be any new branches of government offices opened in Gaza this year despite the formation of a national unity government since 2 June 2014. This decision was made even though the PA in Ramallah had committed previously to extend its responsibilities and objectives to the Gaza Strip. Economic hardship has prevailed in Gaza, with the unity government fulfilling the bare minimum of its requirements.

Government workers in Gaza are facing difficult times as a result of the lack of stability in both the work place and in the release of their monthly salaries. In the best-case scenario, some employees have been given access to approximately 40 per cent of their salaries equating to 1,200 New Israeli Shekels (NIS) per month. What this means is that nearly 50 per cent of families have faced great difficulties over the past three years with no hope that this issue will be given the proper attention at any time in the foreseeable future. There are also a number of employees who are working in organisations that are unable to meet their financial commitments, including salary payments.

The Palestinian people have been deprived of feeling any semblance of humanity or any hope that they will be compensated for their production. There are currently 60 to 70,000 civil and military employees who are working in high-level jobs and have not received their full salary since June 2007. Since then, Palestinian civil society has been facing a number of economic, political and personal hardships.

The new budget for 2016 revealed a total (pre-funding) deficit of $1.381 billion out of an overall total expenditure of $4.251 billion. Thus, the total deficit is worth 32.5 per cent and it has resulted from the government’s lack of ability to address growing expenses. There is not enough public revenue to bring an end to the financial deficit.

There are reports indicating that international donors provide an estimated $995 million worth of support within a given year in an effort to bridge the public deficit. Nevertheless, there remains $387 million worth of debt that remains to be covered, assuming that all of the financial commitments of the donor countries are used in the PA budget.

Thus, it becomes the PA’s responsibility to cover what is left in the deficit. This places the authority in a predicament in which it has to increase taxes, cut arbitrary costs or borrow from outside sources. All of these options burden the Palestinian public yet further and do little to overcome the problem.

Part of the general budget includes the obligation to pay $250 million worth of debt. This is a positive step because it is way to bail out local banks who provide a number of services and gives them the power to borrow money again should they need to.

This year’s budget was the result of a series of consultations carried out by the council of ministers working with lawmakers and specialists to come up with the new fiscal plan, because the Palestine Legislative Council has been inactive since the beginning of the political division.

What is clear from this year’s budget proposal is that the PA has previously looked for ways to evade its financial responsibilities by presenting it later than scheduled. By presenting the budget earlier, the government shows that it is committed to solving the problem surrounding the financial deficit and that it will work towards implementing the necessary legislative policies that will solve this problem in the correct way.

Translated from Palinfo.com, 12 April, 2016

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