Cash-strapped and Cornered, the Palestinian Authority Gets Creative

Facing government paralysis and mounting debt, the Palestinian Authority is turning to creative solutions like the new Yabous app

July 21st, 14PM July 21st, 14PM

In the days preceding last week's European Union-led Palestine Donor Group conference in Brussels, Palestinian public-sector workers hoped the problem of their salaries, which have been paid only partially for years, was finally nearing a solution. But immediately afterward, government spokespeople were forced to drastically lower expectations.

Although almost $1 billion was pledged to rebuild infrastructure in the Gaza Strip, a commitment the Palestinian Authority welcomed, none of that money will go toward salaries or the government's budget. By contrast, the comparatively modest sum pledged directly to the PA – 41 million euros ($46.9 million) – would not cover even a single month of the partial salaries it pays, which total between 550 million and 600 million shekels ($181 million to $198 million).

The spokespeople for the PA could not even tell civil servants when the next salary would be paid. The most recent payment, made on June 24, covered 50 percent of their March salaries.

After the cuts, the minimum salary is 2000 shekel. Yet staple expenses such as gasoline, water and electricity cost as much as they do in Israel. Travel is even more expensive because of Israeli army and settler roadblocks, while value-added tax is only slightly lower than in Israel, 16 percent compared with 18 percent.

Many government offices sit largely empty throughout the week, and services to the public have been cut. When civil servants receive only half their salaries, many struggle to pay even for the commute to work, especially those who live in distant towns and villages.

Despite all this, officials portrayed the Brussels conference as an achievement, partly because Palestinian Prime Minister Mohammad Mustafa co-chaired it alongside Dubravka Suica, the European Union commissioner for the Mediterranean. However, a less flattering – but more fitting – description for the donor conference would be begging for handouts.

Mustafa and his finance minister have little choice. Their daily task is to delay the collapse of the health and education sectors while trying to avert a social implosion that is constantly looming. These efforts include several creative solutions, and recently, a new app that simultaneously regulates debt repayment to public-sector employees and tax collection from companies.

Mustafa told conference participants nothing they did not already know when he said that the most severe economic crisis in the PA's history stems from Israel's continued withholding of Palestinian customs and import tax revenues. According to the Palestinian Finance Ministry, Israel is currently holding 18 billion shekels (about $6 billion) belonging to the PA, almost six times the amount pledged in Brussels for Gaza's reconstruction. Local taxes generate only about a third of the PA's monthly revenue, roughly 250 million shekels.

The countries represented at the conference continue to declare their commitment to the Oslo Accords while fully aware that Israel openly disregards and violates them. Yet they remain either unwilling or unable to exert effective pressure on Israel to at least release the PA's money.

Instead, they can only pledge and allocate their taxpayers' money piecemeal, in amounts many times smaller than what Israel is looting from Palestinian taxpayers and customs revenues. The EU had already allocated 310 million euros (about $355 million) to support the PA in 2026 and 2027 even before last week's conference. But transferring those funds involves an exhausting bureaucratic process.

Alongside its search for international donations, the Palestinian Finance Ministry must constantly beg suppliers to which it owes vast sums to muster a bit more patience. It pays pharmaceutical manufacturers and importers only tiny part of what they are owed – just enough to enable them to bring in some essential medicines. It relies on European funding for hospitals in East Jerusalem and the West Bank so cancer and dialysis patients can continue receiving treatment. At the same time, it is dealing with repeated threats from fuel suppliers to stop providing fuel to the security forces.

Meanwhile, the ministry looks for ways to collect long-overdue debts from local governments, even if that means accepting postdated checks that it then presents to banks as part of the endless negotiations required to keep banks extending credit for day-to-day government operations.

With assistance from a British company funded by the British government, the PA is also trying to improve tax collection in the West Bank, where officials know that tax evasion and black-market activity are widespread. It is also considering raising rates for the third highest tax bracket, though it expects fierce opposition from the business sector.

Financial acrobatics

As a way to pay some of the money it owes its employees, the PA covers certain expenses for them. This year, for example, the Transportation Ministry paid their vehicle licensing fees. Under a special arrangement with universities, the PA also covers half the tuition costs for the children of public-sector employees. Last semester, according to government spokespeople, it paid 49 million shekels on behalf of 11,000 students.

"The finance minister is operating in a minefield," said government spokesman Mohammed Abu al-Rub.

And he's right. Soliciting donations while juggling banks, suppliers and civil servants has become routine for the PA. But recently, the Finance Ministry introduced an even more creative mechanism: a financial app designed for the roughly 150,000 public-sector employees to whom the PA collectively owes more than $3 billion.

The app, called Yabous – an old name for Jerusalem – allows users to cover their monthly payments or part of their accumulated debts to providers of essential services such as electricity, water, telephone and internet. In return, the equivalent amount is being deducted from the taxes those companies pay to the PA.

Each user has up to 500 shekels a month in his or her balance. They may use only part of that amount and carry the balance forward to future months. Every payment made through the app is deducted from the government's accumulated debt to that employee. Users may also pay bills or debts on behalf of other people. The PA ultimately intends to include payments to local councils as well.

According to the Finance Ministry, a two-week pilot concluded successfully last week. It included employees from four relatively small government bodies: the Ministry of Jerusalem Affairs, the Jerusalem Governorate offices, the Civil Defense service and the customs administration.

Murad Amro, who directs the project, said that by the end of July all public-sector employees will be able to use the app. The ministry also aims to expand it to pensioners and temporary workers.

Media interviews with Amro and government officials, as well as comments on social media and in private conversations, indicate several concerns. Some fear the app could expose users' bank accounts, making them vulnerable to hacking or misuse. Others argue that because the arrangement is not anchored in legislation, there is no guarantee against future abuse by government agencies. Some also say users have too little control over which services they can pay for through the app.

Some of these concerns stem from incomplete information or from the government's failure to clearly explain how the app works. Government spokespeople insist that users' privacy is protected, that registration is entirely voluntary, and that three cybersecurity firms, including one international company, have verified the app's security. As an additional safeguard, users have to connect through a Palestinian phone number and a Palestinian internet service provider only.

Others object because the internet and cellular companies participating in the arrangement are monopolistic and extremely profitable. An article published last week in the financial newspaper also noted that women, older people and residents of peripheral areas are generally less familiar with digital services. It warned that women who do use the app may end up shouldering responsibility for most household payments.

These criticisms point to broader structural social and economic problems that the government alone cannot solve. They also reflect the deep suspicion with which many Palestinians view every government initiative. The PA spokespeople emphasize that Yabous ensures people will not suffer from the cutoff of essential services, and recommend viewing the app as a tool to support Sumud – the Arabic term meaning "steadfastness" – which has become a defining feature of Palestinian life under decades of Israeli occupation.