EU PEGASE direct financial support to PA budget (Feb 2009) – Progress report/Non-UN document

PEGASE is the new European mechanism launched on 1 February 2008 by the European Commission to help build a Palestinian State. PEGASE is fully aligned with the three-year Palestinian Reform and Development Plan (PRDP). The mechanism aims to shift from emergency assistance to a sustainable Palestinian development process through support in four key sectors: governance, social development, economic and private sector development, and public infrastructure development.

Below is the overview of the PEGASE programmes of direct support to recurrent costs of the Palestinian Authority, such as salaries, social expenditure, net lending and arrears towards the private sector.

ued service delivery in the areas of health, education and social services

Public administration and services

The Palestinian Authority’s expenditure on wages accounts for almost half of yearly public expenditure. The PRDP calls for a significant share of donors’ funds to help the PA alleviate its budget deficit and avert a fiscal crisis. PEGASE contributes on a monthly basis to the payment of salaries and pensions by the Ministry of Finance. This support directly benefits approximately 78,000 Civil Servants and Pensioners (CSP), such as teachers and doctors, who provide key public services to the overall population throughout the occupied Palestinian territory.

Aid to vulnerable Palestinian families

Given the difficult socio-economic situation, the burden on social assistance systems has increased significantly. In order to reinforce social protection and improve the Palestinian Authority’s public finances, PEGASE grants direct support to poor and vulnerable families who depend on financial aid from the administration. Payments of allowances are made on a quarterly basis to beneficiaries of the Ministry of Social Affairs’ cash support programme. This support directly reaches over 47,000 vulnerable Palestinian families to whom allowances are paid over the counter in 42 bank branches throughout the occupied Palestinian territory.

*50.3% of beneficiaries of PEGASE aid to vulnerable Palestinian families are in the Gaza Strip, and 49.7% are in the West Bank.

4 Provision of essential public services

In order to help the Palestinian Authority ensure the continued provision of essential services to 1.4 million Palestinians in Gaza, PEGASE contributes to the delivery of fuel to the Gaza Power Plant. This support enables the production of electricity for households, schools, hospitals and public services throughout the Gaza Strip. The overall delivery process is subject to strict monitoring and controls.

In addition, with these funds, PEGASE also directly supports the PA’s public reform objectives by funding part of the net- lending stemming from the government subsidies of West Bank and Gaza citizens’ consumption of energy.

alestinian businesses to flourish

4 Private sector arrears

The Palestinian Authority has built up debts towards private sector businesses for the purchase of goods and services. PEGASE helped reduce the stock of unpaid bills accumulated by the PA towards private sector businesses. Since the beginning of 2008, PEGASE provided direct support to almost 650 businesses in the occupied Palestinian territory, out of which around 40% are in the Gaza Strip and 60% in the West Bank. This contribution resulted in a rapid injection of funds into the economy, which provided relief to Palestinian businesses and raised their purchasing power. It further secured the employment of thousands of Palestinian workers and, consequently ensured that the provision of services to the administration could continue. From 1 February to 22 September 2008, PEGASE made five payments and fully disbursed funds made available by the EC budget to this programme.

In addition, Spain provided through PEGASE a contribution of €3 million to the payment of Palestinian Authority arrears for the purchase of medicines, the implementation of which is ongoing.