PA faces severe budget deficit due to reduced revenues, increased Israeli cuts

(MENAFN) The Palestinian Finance Ministry announced on Tuesday that the budget deficit for the Palestinian Authority (PA) this year is set to increase by a staggering 172 percent compared to the previous year. This sharp rise in deficit is attributed to a 21 percent decline in revenues, largely due to the impact of the ongoing Israeli military operations in the Gaza Strip.

In response to the financial strain, President Mahmoud Abbas has approved an emergency budget for 2024 that introduces a series of austerity measures. These measures include cuts to salaries and wages, reductions in both operating and capital expenditures, and a focus on maintaining only essential development expenditures. The PA has struggled to fully pay public sector salaries since 2022, a situation exacerbated by a decrease in international aid and Israel's withholding of tax revenues.

In early July, Israel transferred 435 million shekels (approximately USD116 million) in tax revenues to the PA, marking the first such transfer since April. However, the PA's financial difficulties have been further compounded by Israel's policy of deducting about two-thirds of Palestinian tax revenues since October of the previous year. The Israeli government has imposed additional deductions as a result of recent conflicts, leading to a projected total of 3.9 billion shekels in deductions—an increase of 100 percent over the previous year and 560 percent compared to 2022.
 

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