IMF Rejects Israel’s $1 Billion Loan Request For Palestinian Authority

The International Monetary Fund (IMF) has turned down an appeal from Israel for $1 billion in bridge loan funding to the Palestinian Authority (PA) government, reported the Times of Israel on Monday, after claiming that it did not wish to set a precedent of non-state entities receiving loans by proxy.

The International Monetary Fund (IMF) has turned down an appeal from Israel for $1 billion in bridge loan funding to the Palestinian Authority (PA) government, reported the Times of Israel on Monday, after claiming that it did not wish to set a precedent of non-state entities receiving loans by proxy.

According to PA labour minister Ahmad Majdalani, the West Bank government was now in its “worst financial crisis” since it was formed in 1994; and was in desperate need of cash to pay off private loans and government salaries.

[quote]“What is available to the Palestinian Authority at the moment in terms of funds is not enough to pay government employee salaries this month, with Ramadan approaching,” Majdalani told AFP.[/quote]

Related: West Bank (Palestine) Economic Statistics and Indicators

“It is not sufficient to pay the bills that the Palestinian Authority owes to private companies,” he said.

Additionally, Majdalani claimed that some Arab countries had failed to follow through with their financial pledges, which has resulted in a shortfall of hundreds of millions of dollars to the PA.

Over the weekend, PA Prime Minister Salam Fayyad met with Bank of Israel Governor Stanley Fischer to discuss the situation. Fischer subsequently appealed to the IMF for a loan for the PA, as the PA cannot ask the IMF for money on its own because it isn’t a state, but the international organisation rejected the request.

Meanwhile, the executive committee of the Palestine Liberation Organization also warned on Saturday of the dire funding situation facing the government.

[quote]“The executive committee calls on all the brotherly Arab nations to contribute to the solution of the urgent financial crisis that the national authority faces,” it said, according to AFP.[/quote]

“The continuation of this crisis will threaten both the Authority’s short and long-term development and the stability of its institutions,” the committee warned. “The current financial situation is worse than any previous circumstances and requires rapid intervention.”

Fayyad’s government is expected to meet again on Tuesday to discuss the crisis and chart a path forward.

Furthermore, Israel has a clear interest in preventing the financial collapse of the PA, given that the vast majority of Israelis and most of the international community still believe that the PA — and not Hamas which won general elections in 2007 — is the only possible partner for Israeli-Palestinian negotiations.

Related: Economic Peace Between Israelis and Palestinians?

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