West Bank and Gaza
Recent Fiscal and Financial Developments
The Palestinian government has been facing a very difficult fiscal situation since end-March 2006. During April–September, resources available to fund the government’s recurrent expenditures fell sharply, as an unprecedented drop in tax revenues—largely because Israel stopped transferring indirect taxes it collects on the Palestinian Authority’s behalf—was only partially offset by an increase in external support. The scarce resources that were available were used mainly for payments to government employees and to finance fuel imports. Government workers on average received payments equivalent to only about 40 percent of their normal incomes. As a result, little was left for ministries’ running costs and social transfers.