The World Bank is ignoring the elephant in the room

In its recent report on the P.A. financial crisis, the World Bank shamefully absolves the P.A. of fiscal responsibility.

Lt. Col. (res.) Maurice Hirsch
Lt. Col. (res.) Maurice Hirsch is the director of the Initiative for Palestinian Authority Accountability and Reform in the Jerusalem Center for Public Affairs; a senior legal analyst for Human Rights Voices; and a member of the Israel Defense and Security Forum.

In a press release accompanying a new World Bank report assessing the Palestinian Authority economy, Kanthan Shankar, the World Bank’s Country Director for West Bank and Gaza, says the P.A. is having financial difficulties due to the “liquidity squeeze.”

In the release, posted on the World Bank website, Shankar writes: “The outlook for the Palestinian territories is worrisome as drivers of growth are diminishing and the severe liquidity squeeze has started to affect the P.A.’s ability to fulfill its responsibilities of paying its civil servants and providing public services.”

This bleak prognosis was based on a 15-page report that pointed to two major factors contributing to the P.A.’s financial crisis, but which completely ignored the elephant in the room: The P.A.’s financial crisis is a direct result of its “pay-for-slay” policy.
The P.A. squanders millions of shekels/dollars/euros a year to pay monthly salaries to terrorist prisoners and released prisoners, as well as monthly allowances to wounded terrorists and the families of dead terrorists.
According to the World Bank report, the two dominant factors underlying the P.A.’s latest financial crisis are Israel’s “unilateral deductions of almost $12 million per month from the tax revenues it collects on behalf of the P.A.” and a reduction in foreign aid.
Providing no context for the Israeli deductions, in what can at best be seen as an act of willful blindness and at worst is a deliberate attempt to mislead the international community, the World Bank report never once refers directly to the Israeli law according to which Israel withholds P.A. taxes in an amount equaling that which the P.A. spends on rewarding terrorists.
The report did not explain, for example, that the P.A. budgeted hundreds of millions of shekels in 2018 alone to reward the wounded terrorists and the families of the dead terrorists, and that the P.A. admitted to paying NIS 502 million ($144 million) in salaries to terrorist prisoners and released prisoners.
Having noted the deduction and the fact that the P.A. then refused to accept the remaining tax funds—which Israel has already attempted to pass on to the P.A.—much of the rest of the World Bank report is dedicated to explaining how the P.A. has dealt with the consequences of its own decision. The report goes to great lengths to explain the depth and effects of the crisis—but never notes that is entirely self-created.
First, were the P.A. to abandon its “pay-for-slay” policy, Israel would no longer be compelled by law to make deductions from the tax revenues.
Second, the deductions made by Israel account for only 6% of the P.A. tax revenues. Israel has transferred the remaining 94% to the P.A., but the P.A. rejected the funds.
Third, while the P.A. decided to cut the salaries of its public employees as a result of the financial crisis it has driven itself into, that decision did not apply to the P.A.’s “pay-for-slay” beneficiaries—the terrorists. As opposed to the law-abiding P.A. employees, whose salaries were cut, the monthly salaries the P.A. pays to the terrorist prisoners and released prisoners, and the monthly allowances paid to wounded terrorists and the families of the dead terrorists, remained unchanged.
The cumulative distorted impression deliberately given by the World Bank report is that Israel arbitrarily and without cause withheld funds from the P.A., and that the P.A. is merely an innocent victim.
Compounding its willful blindness (at best) or deliberate attempt to mislead the international community (at worst) the report adds that an additional causal factor of the financial crisis is the decline in foreign aid. Here, too, the report ignores the elephant in the room.
In 2018, the American Taylor Force Act conditioned hundreds of millions of dollars of U.S. direct aid to the P.A. on the abolition of the P.A.’s “pay-for-slay” policy. Instead of accepting that the continued implementation of the policy of rewarding terrorists would result in the loss of all aid money from the P.A.’s most generous donor, the P.A. rejected the US condition.
Having already lost the aid, P.A. leader Mahmoud Abbas clarified that “Even if we have only a penny left it will only be spent on the families of the Martyrs and the prisoners, and only afterwards will it be spent on the rest of the people.” (Official P.A. TV, July 24, 2018).
Abbas has since reiterated this statement numerous times.
Giving outright precedence to its “pay-for-slay” policy over any U.S. aid, in December 2018, then P.A. Prime Minister Rami Hamdallah waived all remaining U.S. aid that was not conditional upon the P.A. abolishing its policy.
Other countries that cut aid to the P.A. as a result of its policy of rewarding terrorists included Australia and Holland, with Sweden and Norway making similar decisions.
Incredibly, similar to its omission of any context regarding Israel’s “deduction,” the World Bank report fails to note that the decline in foreign aid is also a direct product of the P.A.’s “pay-for-slay” policy.
As if these critical contextual omissions were insufficient, the World Bank report ends with the recommendation that “The P.A. should work closely with development partners to identify additional external aid as without it, a fiscal and economic crisis cannot be avoided in the absence of clearance revenues in 2020.”
In other words, instead of clearly identifying the P.A.’s “pay-for-slay” policy as the main obstacle and root of its financial crisis and recommending that the P.A. immediately abolish this policy, shamefully, the World Bank’s recommendation is that the international community continue to fund both the P.A. and its noxious policy.
Distorted reports such as these, from ostensibly neutral and professional international bodies, entrench the bias against Israel and embolden the P.A.’s victimhood narrative. Such reports do nothing to hold the P.A. accountable for its own decisions and nothing to promote either peace or fiscal stability for the P.A. and the Palestinians.
Israel’s “Deduction Law” was passed in July 2018. The law instructs the state to deduct and freeze the amount of money the P.A. pays in salaries to imprisoned terrorists and families of “martyrs” in one year from the tax money Israel collects and transfers to the P.A. in the following year. Should the P.A. stop these payments for a full year, the Israeli government would have the option of giving all or part of the frozen money to the P.A.
The law was first implemented in February 2019, shortly after the murder of Ori Ansbacher, when Israel’s Security Cabinet decided to withhold NIS 502,697,000 (approximately $138 million) from the P.A., to be deducted in 12 monthly parts.
Col. (res) Maurice Hirsch is the Head of Legal Strategies for Palestinian Media Watch. He served for 19 years in the IDF Military Advocate General Corps. In his last position he served as Director of the Military Prosecution in Judea and Samaria.
The opinions and facts presented in this article are those of the author, and neither JNS nor its partners assume any responsibility for them.
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