Remarks by World Bank Vice President for the Middle East & North Africa at the Ad Hoc Liaison Committee Ministerial Meeting

Ferid Belhaj, World Bank Vice President for the Middle East & North Africa

3 June 2020

Madame Chair, Excellencies,

We are gathered today in unusual circumstances and in unusual and challenging times.  Despite the early and decisive action by the Palestinian leadership, Covid-19 is inflicting severe damage on the Palestinian economy, which is still recovering from the 2019 fiscal crisis.

The World Bank estimates that the economy will contract between 7.5 and 11 percent in 2020, depending on the speed of the recovery from the recently ended lockdown.

Palestinian livelihoods will be impacted immensely. Unemployment and poverty, both around a quarter of the population before the outbreak, are expected to grow.

The private sector suffered under the shutdown, especially Small and Medium Enterprises (SMEs) and businesses operating in the informal sector.

A rapid rebound, beyond the containment period, will be heavily influenced by the Palestinian Authority’s ability to provide liquidity for the private sector in the coming months.

In this, everyone here has a role to play in supporting Palestinian livelihoods and helping the economy make a recovery.

The Palestinian Authority is severely hamstrung in its ability to provide social assistance to the new poor and private sector support to help the economy respond to the crisis.

With a significant public revenue reduction and additional expenditure demands, the Palestinian Authority’s financing gap is likely to exceed $1.5 billion. This calls for a reprioritization of its pre-Covid planned expenditures.

The Palestinian Authority could also work actively with other parties to maximize available financing, such as donor support, which would allow the Palestinian Authority to remain within previously set domestic borrowing limits and would in turn enhance the liquidity that domestic banks can make available to the private sector.

The Government of Israel can play an important role by working closely with the Palestinian Authority to enhance the revenues it collects and to improve the conditions for economic activity—for example by reaching an agreement with the Palestinian Authority on exit fees from Allenby – King Hussein- Bridge.

The cooperation between the Palestinian Authority and the Government of Israel, in responding to the Covid-19 crisis, provides a positive example of how this can be achieved.

The wider donor community can play a vital role by both financing some of the demands facing the Palestinian Authority and by bringing innovation and expertise to spur economic development.

At the World Bank, we have mobilized resources to support the Palestinian Authority health response to the pandemic. We have provided additional budget support, and we are preparing projects to enhance social assistance, help in local government service delivery, and assist the private sector recover from the crisis.

We also believe that improvements in digital infrastructure can be a game-changer for the Palestinian economy.

While the full potential of the Palestinian economy will not be realized without the removal of restrictions on movement and access, the digital economy can overcome geographic obstacles, foster economic growth, and create better job opportunities for Palestinians.

With a tech-savvy young population, the potential is strong. However, the Palestinians should be able to access resources similar to those of their neighbors and be able to rapidly develop the regulatory environment to allow for the sector to progress.

Let us build on the cooperation during these times of crisis. Let us stride forward and prioritize sustainable progress. Let us support human livelihoods and private sector-driven job creation. We are already mobilizing additional resources to help accomplish these goals, and we stand ready to collaborate together to do so.

Thank you