Public Finance Management in Palestine

-        The public in Palestine remains a primary source of revenue in the government's general budget annually, through the collection of local taxes and fees paid by it, in addition to the collection of clearance revenues deriving from it as well, through private sector purchases of goods and services from within Israel, or via it from abroad, and withholding taxes on Palestinian workers who work in Israel... Many factors, and surrounding conditions, impeded the possibility of generating income from government investments through its bodies and public funds.....and directing its public spending to investment sectors that generate income, and reduce the deficit and the financing gaps of the annual general budgets over previous years...and until now...!

-        Financial operations – revenues, expenditures and sources of financing for the period (from 1-2021 until 5-2021).

-        Based on statistics of the Ministry of Finance and Planning – Ramallah. Issued from (January 2021 until the end of May 2021) only.....Table No. 2 "Details of revenues, expenditures and sources of financing (cash basis) – actual – until May 2021."

·       Note: A mistake appeared in Ministry of Finance statement No. (3) related to the cumulative total of arrears up to May 2021, in the writing of the year concerned, where year 2020 was recorded (error) and the correct entry is year 2021, therefore it is necessary for the Ministry of Finance to correct the year from 2020 to become 2021 in statement No. (3) related to the cumulative total of arrears...until month 5-2021..

-        We list below the data for net revenues, net public expenditures and net lending during the period from 1-2021 until 5-2021):

-        And: Total net revenues....The value of total net revenues (cash basis) – actual – up to the end of May – 5 – 2021 and from the beginning of the year, amounted to 5,805 million shekels..(Five billion eight hundred and five million shekels)..., and the revenues during the first five months of 2021 arose and were confined to the following sources:

1-   (Total domestic revenues), amounted to 1,872 million shekels, of which 1,307 million shekels were taxes, and 385 million shekels were non-tax (fees, fines and penalties ..etc.), in addition to 180 million of designated collections...(which are taxes for local bodies, from property 90%, and from road transport fees for bodies, at 50%)...

2-    (Total clearance revenues), up to the end of May -5- 2021, which amounted to 4,041 million shekels (four billion and forty-one million shekels)...

-        Second: Total expenditures and net lending (cash basis): Total public expenditures and net lending, from January until May 2021, amounted to 4,601 million shekels...and were spent on the following items and responsibility centers (cash basis), as follows:

1-   Salaries and wages amount (52%) amounting to 2,381 million shekels

2-   Government social contributions amounting to approximately 2 million shekels

3-   Use of goods and services (7%) amounting to 327 million shekels

4-   Transfer expenditures (25%) amounting to 1,160 million shekels.

5-   Minor capital expenditures amounting to about 3 million shekels..

6-   Interest on public debt (3%) amounting to 134 million shekels..

7-   Net lending (11%). amounting to 507 million shekels...

8-   Allocated provisions (2%) amounting to 85 million shekels

-        The items of public spending in the period from January 2021 until May 2021, (according to Statistical Statement of the Ministry of Finance and Planning No. 5 b), where the total expenditures on an accrual basis – according to the annual general budget, amounted to 6,520 million shekels... were divided into sectors of responsibility centers, (amounting to 6,087 million shekels) the most important of which were:

-        First: the Governance sector, which was allocated from public expenditures – according to the statistical disclosures of the Ministry of Finance and Planning – an amount of 3,138 million shekels, representing 52% of net public expenditures for the above period, on an accrual basis, and among the responsibility centers that fall under this sector:

-        Palestine Liberation Organization (PLO) institutions, which were allocated 414 million shekels, their expenditures constituting 13% of the Governance sector expenditures, then

-        Pension allowances for retirees whose expenditures amounted to 787 million shekels, constituting 25% of the Governance sector expenditures, then

-        Ministry of Interior and National Security, whose expenditures amounted to 1,361 million shekels, constituting a proportion of 43% of the Governance sector expenditures.

-        The other main sector of responsibility centers and directed a portion of public spending is:

-        Second: the Social Affairs sector, which was allocated 2,650 million shekels, a proportion of 44% of net public expenditures on an accrual basis for the period under study (from 1-2021 until 5-2021), and among the main responsibility centers in this sector:

-        Ministry of Education, which was allocated 1,256 million shekels, its expenditures constituting 47% of the Social Affairs sector expenditures. Then

-        Ministry of Health, which was allocated 732 million shekels...constituting 28% of the Social Affairs sector expenditures...

-        Ministry of Social Affairs, which was allocated 428 million shekels, constituting 16% of the Social Affairs sector expenditures in the responsibility centers...

-        Regarding external support for the budget. during the period from 1-2021 until 5-2021....there are no international grants, or budget support for this year until May 2021....according to Ministry of Finance statistics... except for developmental financing amounting to 115 million shekels. (previous balances). during the period referred to above.

-        The value of net financing from local banks from 1-2021 until 5-2021 amounted to 697 million shekels.

-        As for net arrears, accumulated from previous years and the 5-month period of this year..until May 5 ...2021, according to statement No. 3 "Aggregate statement of financial operations – revenues and arrears until May 2021.." they amounted to 8,340 million shekels

-        Public debt is still rising, as the total public debt according to statement No. (7) from the Ministry of Finance and Planning calculations for May -5-2021, is as follows:

-        The value of public debt, up to May 2021 amounted to 11,823 million shekels, equivalent to 3.636 three billion, six hundred and thirty-six million dollars,

-        The domestic debt of it, up to the same period amounted to 7,525 million shekels, equivalent to 2.314 billion dollars, and the external debt amounted to 4,297 million shekels ..equivalent to 1.321 billion dollars... of the external debt.. Arab lending institutions were allocated 816 million dollars (2,655 million shekels), and external institutions 335 million dollars (1,090 million shekels).

-        The value of transfer expenditures from January until May 2021, totaled 1,512 million shekels (on an accrual basis), while on a cash basis – actual – it amounted to 1,160 million shekels...and its allocation was as follows:

-        First: 650 million shekels, the value of social assistance benefits (accrual basis) according to statement No. 8a. As for what was actually disbursed as transfer expenditures (cash basis), it amounted to 407 million shekels...

-         Social assistance amounting to 338 million shekels (accrual basis), while on a cash basis – actual – 171 million shekels...

-         Assistance to indigent families amounting to 242 million shekels (accrual basis) – according to the budget – while on a cash basis it amounted to 166 million shekels.

-         As for unemployment benefits, they amounted on an accrual basis or on a cash basis almost equally to 69 million shekels.

-        Second: Social security pensions (civil and military pensions), they amounted to 800 million shekels (accrual basis), and 719 million shekels on a cash basis..

·       Public expenditures – net lending

-       The Total public expenditures, and net lending, from January – 1 – until May – 5 – 2021, amounted to 4,601 million shekels (cash basis).." Ministry of Finance and Planning page - Table No. 2 Financial operations – details of revenues, expenditures and source of financing (cash basis) May "2021."

-       It should be noted that the total public expenditures and net lending (accrual basis) – according to the annual general budget "Table No. (1), Financial operations – details of revenues, expenditures and sources of financing (accrual basis) May 2021", amounted to 6,520 million shekels... was allocated to responsibility center sectors in the amount of 6,087 million shekels, the details of the allocations in its responsibility center items were as follows:

- Payroll and wages expenditures: their total during the period referred to above amounted to 3,180 million shekels (on a commitment basis), representing 49% of the total public expenditures during that period... Moreover, more than 82% of the total of these payroll and wages were allocated for disbursement, according to items of the annual general budget, to some of the following responsibility centers:

- Ministry of Interior and National Security: its wage and salary expenditures amounted to 1,109 million shekels, i.e., 35% of the total wage and salary expenditures.

- Ministry of Education : its wage and salary expenditures amounted to 1,042 million shekels, i.e., 33% of the total wage and salary expenditures.

- Ministry of Health: its wage and salary expenditures amounted to 347 million shekels, i.e., 11% of the total wage and salary expenditures.

- Palestine Liberation Organization (PLO) institutions: their wage and salary expenditures amounted to 80 million shekels, i.e., 3% of the total wage and salary expenditures.

- Expenditures on the use of goods and services: their total during the period referred to amounted to 743 million shekels (commitment basis), representing 11%... of the total public expenditures. Moreover, more than 77% of the total of these goods and services expenditures were allocated for disbursement to some of the following responsibility centers:

- Ministry of Health: its expenditures on the use of goods and services amounted to 344 million shekels during the period referred to above, i.e., 46% of the total expenditures on the use of goods and services.

- Ministry of Interior and National Security: its expenditures on the use of goods and services amounted to 96 million shekels during the period referred to above, i.e., 13% of the total expenditures on the use of goods and services...

- Ministry of Education: its total expenditures on the use of goods and services amounted to 73 million shekels, i.e., 10% of the total expenditures on the use of goods and services.

- Palestine Liberation Organization (PLO) institutions: their total expenditures on the use of goods and services amounted to 62 million shekels, i.e., 8% of the total expenditures on the use of goods and services.

- Transfer expenditures: their total during the period referred to amounted to 1,512 million shekels (commitment basis), representing 23%... of the total public expenditures. Moreover, more than 95% of the total of these transfer expenditures were allocated to some of the following responsibility centers:

- Pensioners: their total expenditures during the period referred to amounted to 786 million shekels, i.e., 52% of the total transfer expenditures.

- Ministry of Social Affairs: its transfer expenditures amounted to 395 million shekels, i.e., 26% of the total transfer expenditures.

- Palestine Liberation Organization (PLO) institutions: transfer expenditures during the period referred to above amounted to 264 million shekels, i.e., 17% of the total transfer expenditures.

- Development expenditures: their total during the period referred to amounted to 254 million shekels (commitment basis), representing 4%... of the total public expenditures. Moreover, more than 43% of the total of these development expenditures were allocated for disbursement to some of the following responsibility centers:

- Ministry of Interior and National Security: development expenditures during the period referred to above amounted to 41 million shekels, i.e., 16% of the total development expenditures...

- Ministry of Education: development expenditures during the period referred to above amounted to 35 million shekels, i.e., 14% of the total development expenditures.

- Water Authority: development expenditures during the period referred to above amounted to 33 million shekels, i.e., 13% of the total development expenditures.

- It is clear that the annual general budget is in continuous deficit, the financing gap is growing, and the public debt, whether domestic — bank borrowing, arrears, etc. — or external, is increasing in size, as is the burden of servicing that debt... over the years.

- Revenues derive mostly from local revenues and clearance revenues, which are paid by the Palestinian public, whether the private sector, workers in Israel, government employees, or the private sector... in the form of taxes, fees, customs and tax withholdings... and these revenues are not sufficient to pay public expenditures, as published above, noting that these expenditures are not spent on productive and investment sectors to increase government income sources, since wages and salaries absorb more than 50% of public revenues, in addition to other spending items referred to above, whether transfer or development or the use of goods and services, which are social consumption expenditures such as assistance to poor households, to pay prices of goods and services used by responsibility centers — transfer expenditures — ... Also, the servicing of the public debt is increasing, as 83 million shekels were allocated to pay interest — commitment basis — but 134 million shekels were paid as debt interest and late-payment interest on installments of these debts... noting that capital expenditures are almost negligible compared to other public expenditures. An amount of 3 million shekels was paid as minor capital expenditures, while 11 million shekels were allocated to them — commitment basis — ... which are amounts considered extremely small to finance productive projects....

- In addition, statistics on the Ministry of Finance and Planning page showed that international aid and grants from Arab countries and donor countries stopped starting from the beginning of this year -2021-, not to mention emergency crises such as the Corona crisis.

- As for the Israeli occupation, it controls the Palestinian clearance revenues, and therefore directly deducts any invoices or amounts that it considers, by its definition, dues for Israelis, in addition to its appropriation of funds and allocations that it designates as payments to prisoners and families of martyrs of Palestine, in insolence and defiance of all norms, laws and agreements... This is clear in the item “net lending,” which amounts annually to more than one billion shekels, which the Palestinian government has failed in its attempts to gradually reduce through its annual budget statements (it is like an ozone hole).. In addition to the Israeli occupation’s control over sources of wealth — land, water and air — in the Palestinian areas occupied in 1967, and the classification of areas into C ... and others, which deprives Palestinians of the ability to control and benefit from their lands…

- That the Paris economic agreement signed with Israel in 1994 dug many trenches and pits into which the Palestinians fell in their economic path, and its basis was to attach Palestine to the Israeli customs envelope... and Israel imposed its arbitrary demands without giving any explanations... if the Palestinian side asked them for that.. In addition to complete Israeli control over crossings and borders... therefore, Palestinians have no option to distance themselves from Israel, because the agreements concluded with them, whether economic or political (Oslo), deprived Palestinians of freedom of movement or choice, whether at crossings or by imposing value-added tax, or the prices of vital commodities, such as fuels and cement, etc., noting that it is the Israelis who estimate or approve the estimation of Palestinian market needs for goods and services.... Palestinians have no choice but to rely on themselves, except by liberation from the occupation, or by amending the agreements under real international pressure, to give Palestinians some freedom in the first stage .. until the State of Palestine is established..

- We add here the issue of the quality and transparency of public work: the annual reports of the State Audit and Administrative Control Bureau (SAACB), reports of non-governmental organizations, and civil society — such as "Aman Coalition for Integrity and Accountability" — have shown multiple cases of corruption in public work... and this adds another obstacle in front of the government to increase and diversify its revenues.... and to establish productive and investment projects by its agencies and public funds...!