Preliminary Review of Government Revenues and Expenditures in Palestine, 2018 — Part Two

·       Part Two of total expenditures...developmental expenditures and outstanding arrears

-        Table No. (2) of the financial data published on the وزارة المالية page for 2018 shows that total public expenditures for 2018 amounted to 13,134 million shekels (thirteen billion one hundred thirty-four million shekels - cash basis -), of which: (salaries and wages) in the amount of 5,946 million shekels, representing 45% of total expenditures; (use of goods and services) in the amount of 1,543 million shekels, representing 12%; and (transfer expenditures) in the amount of 4,016 million shekels, representing 31%, in addition to some other expenditures such as minor capital expenditures in the amount of 32 million shekels, interest in the amount of 246 million shekels and net lending in the amount of 967 million shekels representing 7%, earmarked payments 166 million shekels, and then there are the developmental expenditures which amounted to 1,003 million shekels...

-        It is clear, according to Table No. 5b of the statements and schedules of the Ministry of Finance, that expenditures on security and order accounted for 23% of the government spending budget for 2018 – commitment basis – where the Ministry of Interior and Security absorbed more than 2,843 million shekels of public expenditures in the 2018 budget. Expenditure on the Ministry of Health was 1,683 million shekels, representing 11% of the 2018 budget, while education expenditures amounted to approximately 2,689 million shekels, i.e. 18%. The Ministry of Social Affairs had allocated expenditures of 1,318 million shekels, about 9%. Thus the amounts allocated to security and order in the 2018 budget constituted a large share, slightly less than the combined share of the Ministries of Education and Health....!! This is a matter of concern. In most countries the share of the Ministry of Education is the largest share of government spending and exceeds a ministry such as the Ministry of Security in Israel for example..as appears in its 2019 budget, despite its colonial character...!! In Palestine, however, it needs a restructuring and reordering of government spending priorities in a way that is consistent with the declared objectives of the Palestinian National Authority to advance the country economically and raise the standard of living of the people...!!

·       Outstanding arrears owed by the government ...at the end of 2018

-        Regarding the issue of outstanding arrears owed by the government, most of them to the private sector, whose net accumulated amount at the end of 2018 is 2,834 million shekels (two billion eight hundred thirty-four million shekels). I clarify here that there were prior arrears (from 2017 and before) where the value of arrears of previous years up to 2017 and before amounted to about 2 billion shekels (Table No. 3), of which 1,542 million shekels were to the private sector, and 457 million shekels to other entities. An amount of 264 million shekels of arrears of previous years (2017 and before) was paid in 2108, of which 167 million shekels were to the private sector and government payment orders amounted to 83 million shekels, and other items amounted to 12 million shekels,.. leaving 733 million shekels of previous arrears. As for the arrears of the year 2018, the cumulative total of arrears in 2018 amounted to 2,103 million shekels...of which 1,100 million shekels were to the private sector, and other items amounted to 1,003 million shekels... Therefore the net accumulated outstanding arrears owed by the government at the end of 2018 amount to 2,834 million shekels (two billion eight hundred thirty-four million shekels), most of which are to the private sector.......!! As is noted from the actual data at the end of 2018, arrears increased in 2018 over 2017 by 835 million shekels, which will increase the government's obligations... in addition to the burdens of local and external public debt, and the debts of some public funds such as the pension fund, and debt service remains a major concern, in interest and principal which, from reviewing the figures, appears to be accumulating..and increasing... in addition to the fact that domestic borrowing constitutes an obstacle to the activity and investment of the private sector, which seems to be crowded out by the government and deprived of its borrowing ceiling, in addition to the amounts owed from arrears to the private sector, which affects the private sector's ability to advance economic development and play a primary role in it.. This severely harms the course of economic development.. while the State is preoccupied with paying obligations or stopping their increase, which appears from the composition of government expenditures... and that most expenditures are operational and transfer in nature and not investment as we noticed from the shares of spending by sectors.. Therefore, instead of establishing investment projects that create jobs to curb unemployment.. the government follows another path to manage its affairs in order to reduce debts.. where we noted a due interest on foreign debt which the government in 2018 postponed paying, and this is a financial impasse the Palestinian National Authority is passing through..in light of all these challenges..and risks!

·       Government developmental projects in 2018

-        As for the developmental projects whose expenditures amounted to 1,003 million shekels: from my readings of the projects and developments, I noticed that most developmental projects flow into environmental projects, government buildings, security rehabilitation, infrastructure and ongoing operating expenditures, and the genuine investment and capital nature of projects was almost absent from some of these projects. To clarify the picture of the developmental projects carried out by the government, I show below what Table No. 10-A displayed of some of these details about projects funded from abroad and by the Palestinian National Authority, totaling 1,003 million shekels, of which I summarize examples as follows:

·       Project to rehabilitate security apparatuses funded externally – multiple countries – in the amount of 57 million shekels, and the supervision of implementation of the treatment plant for North Gaza funded by the World Bank in the amount of about 32 million shekels, and the design and supervision project for the Yamoun network funded by the French Development Agency, in the amount of about 23 million shekels, and the design, supervision and implementation project for the Tubas Tayaseer sewage network funded by the European Union in the amount of about 18 million shekels, and the project for maintenance of school buildings and their facilities funded by JFA, in the amount of about 18 million shekels, and the buildings project for Magistrate and First Instance courts funded by the European Union in the amount of about 13 million shekels. The table also showed one of the projects funded by the European Union and its value was recorded in the 2018 budget at about 33 million shekels, which is the emergency assistance project for farmers affected by the occupation, of which 7 million shekels were disbursed...

·       There are two projects funded by the United States of America in the amount of 11 million shekels for each project; the first project is the construction of the National Security operations camp in Zahiriyya, and the second project is the completion of the second phase of the Central Training Institute in Jericho.

·       As for the projects carried out by the Authority under the item (developmental budget), the value of these projects in the 2018 budget amounted to 866 million shekels, while the government implemented actual developmental projects amounting to 419 million shekels. I review some of the projects that the Palestinian government carried out under this item: there is a project for expropriation of public lands and buildings for the benefit of the Palestinian National Authority in the amount of about 18 million shekels, while the government carried out a developmental project consisting of capacity building for the Palestinian National Authority in the amount of about 18 million shekels, and the project to build the Elite Administrative College at Al-Istiqlal University, in the amount of about 12 million shekels. There is also a project to support the political and security program of the President in the amount of about 12 million shekels, in addition to a project to furnish the President’s Palace for conferences and complete its construction in the amount of about 11 million shekels. It was also noted that there are some developmental projects of the Palestinian Authority such as the camps support project – Authority-funded – developmental budget, of which about 6 million shekels were disbursed, while its budgeted value for 2018 was 21 million shekels.

Date: 12-2-2019