The Palestinian Authority (PA) said on Thursday it will slash the wages of tens of thousands of its employees after its protest action against Israel‘s annexation plans deepened a cash crisis.
Its economy already battered by the coronavirus pandemic, the PA, which has limited self-rule in Yehudah and Shomron under interim peace deals, last month rejected handovers of taxes that Israel collects on its behalf.
The transfers, about $190 million a month, make up more than half of the PA’s budget and stem from duties on imports that reach the Palestinian areas in Yehudah and Shomron and Gaza via Israeli ports. The PA snubbed the taxes after declaring bilateral agreements with Israel null in May.
Awaiting a green light from its U.S. ally and saying more talks with Washington were needed, Israel did not meet its July 1 target date for the start of a Cabinet debate on extending sovereignty to the Jewish communities in Yehudah and Shomron and the Jordan Valley.
But the economic impact of the PA’s protest against annexation was already being felt.
“Due to the rejection of the tax money and overall decline in income … the state’s revenues have declined by 80%,” Palestinian Finance Minister Shukri Bishara said, also referring to funds lost during the pandemic.
He announced that many of the PA’s 132,000 employees would see their wages cut by half, not to fall below a minimum of 1,750 shekels ($507) a month.
Analysts say the health crisis and financial disputes with Israel could drive the PA to financial collapse. After a surge in new coronavirus cases, the PA has placed several towns under lockdown, which it plans to expand to the entire territory beginning on Friday.