The Civil Society Team for the Enhancement of Public Budget holds its 2024 conference under the theme: Management of Public Funds Under Occupation’s Genocide and Piracy of Palestinian People’s Funds and Resources
The Civil Society Team: Reforming the Political System, a Key Requirement to Launch Financial, Institutional and Administrative Reform
Ramallah - The National Team to Support Public Budget Transparency held its conference for the year 2024, entitled: “Managing Public Finance in Light of the War of Annihilation and the Occupation's Piracy of the Palestinian People's Funds and Resources”, in two sessions, the first of which dealt with an assessment of the public budget performance during the first half of 2024, accompanied by the most prominent decisions, measures and laws taken and approved by the Palestinian Authority within the framework of financial reform and their impact on public finance. The second session addressed the blurring of the financial relationship with the occupation, the steady rise in what is known as net lending, and the clearing crisis between local bodies and the state's general treasury.
Current challenges require the government to adopt a participatory and open approach to managing public finances
The conference began with a speech by the Executive Director of AMAN Coalition, Issam Haj Hussein, noting the participation of the Ministry of Finance in the conference after a long break. He emphasized that the conference is a contribution from the civil team to provide practical recommendations on the most appropriate mechanisms for managing public funds, with prioritization in light of the exceptional and compelling circumstances that the Palestinian people are going through, including the genocidal war that continues to take place directly in front of the world, accompanied by continuous settler incursions and attacks in the West Bank, which affected the land, trees, facilities and infrastructure of Palestinians, and extended to the occupation's piracy of Palestinian funds by stealing half of the Palestinians' money. Hajj Hussein also emphasized that AMAN will continue its role in accountability for the enforcement of policies, procedures, and decisions, and how the government has managed and administered the budget, stressing the necessity to exert pressure towards directing scarce financial resources towards strengthening steadfastness in the face of the Israeli occupation practices.
Speakers emphasized the weak engagement of civil society in decision-making due to the sporadic publication of the Council of Ministers’ decisions and resolutions, which undermines civil society’s role in accountability. It is also noteworthy that civil society organizations were not involved in the preparation of the government's 2024 emergency plan or the emergency interventions contained therein, which focus on relief and reconstruction.
AMAN calls for the formation of a national team to prepare and oversee the implementation of a comprehensive and participatory national reform plan
Haj Hussein explained that AMAN Coalition welcomes the measures and decisions announced by the government to rationalize spending and promote revenues as per the reform agenda, including its financial, administrative and institutional components. He stressed the need for all official parties to adhere to this plan in a manner that does not contradict with the reform directions, including presidential decisions and decrees. Hajj Hussein also called on the government of Prime Minister Dr. Mohammed al-Mustafa to prepare and adopt a public policy that is published and binding on all public institutions, in which the government defines its relationship with civil society organizations, and that the government's approaches should be within the framework of a participatory and comprehensive national plan for reform, which is prepared and supervised by a national team representing all sectors, with the participation of independent experts who enjoy professionalism and efficiency, stressing the need for the Council of Ministers to adopt a national cross-sectoral strategy to strengthen governance and combat corruption under the management and supervision of a national team with clear reference, tasks and powers, as well as to develop a national monitoring and evaluation system to implement the strategy.
NIS 6 billion in withheld clearing funds and NIS 44 billion in public debt as net lending rises to record levels
Lamis Farraj, coordinator of the National Team to Enhance Public Budget Transparency, reviewed the semi-annual report on the performance of the public budget for the year 2024, where the report concluded that there were modest and limited attempts to address the financial challenges in the first half of the year, without a radical approach to confront the ongoing piracy of clearing funds and financial challenges, as the main issues that drain the public budget continue to exist. The report indicated that the occupation continues to deduct clearing funds, as the total frozen funds amounted to about 6 billion shekels. Although expenditures were reduced in a very slight manner related to the genocide war, it was not evident during the first half of the year. Net lending has increased beyond the estimate for 2024, reaching an unprecedented record high. The mid-year report also highlighted the high budget deficit and the possibility of doubling it by the end of the year, which means an increase in public debt and the government's financial obligations, which have accumulated to 44 billion shekels, thus weakening the government's ability to fulfill its obligations and decreasing government services.
Lower actual operating expenses for the Ministry of Health
The report found a decrease in the Ministry of Health's realized operating expenditures, which include the purchase of services outside the Ministry of Health, medicines, consumables, and laboratory materials. In addition, the report found a decrease in medical referrals without a tangible improvement in government services to citizens during the first half of the year. The report also noted the lack of progress in reducing the security sector’s expenditures despite the formation of a review committee as part of the financial and administrative reform package.
AMAN’s recommendation: Expand the scope of spending cuts and control and address the civil and security sector's salary and quasi-salary bill, medical transfers, and net lending
The report provides several recommendations, mainly expanding the scope of expenditure reduction and control and addressing core public budget issues, which consume the largest share of the budget – such as the salaries and quasi-salaries bill in the civil and security sectors, medical referrals, and net lending. It is also necessary to devise an implementable plan to address the debt accumulated by local authorities and utility distribution companies that collect fees for their electricity and water services from citizens through a prepaid system. This is particularly important as net lending reached record levels of NIS 912 million in only 6 months of 2024.
Some decisions contradict the government's approach to fiscal reform
The session continued with a presentation by Al Ahli team member, Lamees Shuaibi, on the 193 measures, decisions, and laws taken and approved by the Palestinian government in the framework of fiscal reform and their impact on public finances during the period from April 2 to September 30, 2024, to monitor developments in the reform process. Shuaibi began her review by talking about the issuance of Decree-Law No. (9) of 2024 regarding the general budget for the fiscal year 2024, published on 8/26/2024, due to the inability to submit the draft general budget for the fiscal year 2024 within the legal deadlines, i.e. 7 months after the fiscal year, and after the end of the extension of the 2023 budget at the end of July, in exception to what is stated in the Public Budget Organization Law No. (7) of 1998, and the constitutional violations and legislation governing the preparation and approval of the general budget. Accordingly, the decree-law allowed the government to submit it no later than June 30, 2024, while granting the Ministry of Finance the authority to collect revenues and continue spending with monthly appropriations at a ratio of (12/1).
The amendments of the Law on Rewards and Salaries for Legislators, Cabinet and Governors contradicts the government's drive for reform and rationalization of expenditures
Shuaibi listed some points that contradict the government's approach to financial reform, such as the law on the remuneration and salaries of members of the Legislative Council and governors, which grants senior officials in the PNA (those who are appointed at the rank of minister and head a government department) the retirement privileges established for ministers, members of the Legislative Council and governors, meaning that they receive the pensions established for ministers without paying contributions to the public pension fund.
Formation of a supreme national committee to handle the restructuring of non-ministerial public institutions
In addition, Shuaibi also touched on Decree Law No. (6) of 2024 on the separation of the industry and national economy sectors, which restored the legal personality and financial independence of the Industrial Estates and Free Zones Authority. She also referred to Decree Law No. (11) of 2024 on canceling the legal personality and financial independence of the Risk Prevention and Agricultural Insurance Fund, and accordingly, the Ministry of Agriculture becomes the Fund’s legal and de facto successor bearing all its obligations, tasks, allocations, properties, assets, funds, rights and employees who are transferred to Ministry. Shuaibi pointed out that the governance of non-ministerial government institutions and the rectification of their status is a support for the Palestinian government's efforts to control public spending and reduce the public budget deficit; nonetheless, the confusion in canceling the legal personality at one time and restoring it at another time leads to the instability of these institutions, which requires a decision by the Council of Ministers to form a supreme national committee to undertake the restructuring process for non-ministerial public institutions.
Miscellaneous comments
Mr. Tarek Mustafa, Director General of the Budget, commented that the Ministry of Finance treats the figures with caution as they reflect services to citizens, adding that in the health sector alone, from the beginning of October 7 until now, about one million Palestinian citizens have been added to the government health system, as the Palestinian government, since October 7th, had to take in charge 200,000 Palestinian workers, who were working in Israel, and their families who received treatment in private hospitals.
Dr. Nasr Abdel Karim commented that the current catastrophic situation requires a different approach by all parties, which requires a real political will for reform with a reform of the Palestinian political system through elections and a legislative council with representatives of the people to oversee and ensure accountability for reform processes and government policies, provided that the heart of the reform process is the sustainability and steadfastness of the authority in the face of the occupation policies that aim to weaken it. Abdulkarim also pointed to the need to focus on economic and social justice in the distribution of burdens and opportunities, by looking at the structure of expenditures and revenues, examining the gaps in salaries, and the need to correct tax justice. Abdelkarim called for a multi-year plan to reduce the public debt deficit. He also noted that reform is useless without talking about political reform as the solution to all reforms, followed by legislative, institutional, and finally financial reform.
Ms. Nihad Younis, Director General of the Palestinian Institute of Public Finance and Taxation, pointed out that being under occupation has not allowed for normal institutional growth, which means that official public institutions and civil society must unite their efforts in order to face this situation together and emerge from it.
Dr. Azmi Shuaibi, the advisor to the board of directors of AMAN Coalition for Anti-Corruption Affairs, criticized the continuation of work without declaring a state of emergency, despite the exceptional circumstances that the Palestinian people are going through, referring to decisions taken in the president's office that pose challenges to the current reform trends, and recalling the case that AMAN is still on trial about, in light of what was revealed in its fifteenth report issued in May 2023, entitled: The State of Integrity and Anti-Corruption in Palestine for the Year 2022 under the slogan: “Occupation, Division, and Political Corruption is a Closed Loop that feeds the other”: about the circumstances of the crime of laundering settlement dates, the relationship of public officials to the case, and attempts to address it outside the normal course of investigation.
The level of transparency in the financial relationship between the National Authority and the occupation state is “low”
In the second session, economic researcher Muayad Afana presented a report entitled: “Transparency in the Financial Relationship between the Palestinian National Authority and Israel.” The report enumerated aspects of the occupation's theft of the Palestinian people's money and listed some issues that, if resolved, would provide the public treasury with good revenues to alleviate the financial crisis endured by the Palestinian Authority. The report summarized that the level of transparency in the financial relationship between the PA and Israel is “low,” as Israel (as an occupying power) adopts a unilateral and selective approach to the financial relationship with the PA, and the financial relationship is closely linked to the political process, as deductions increase as a case of blackmail at every political stage. The report also concludes that the Paris Economic Protocol is a loose protocol that is no longer valid especially when Israel does not abide by it and constantly violates it.
The occupation uses clearance payments as a tool to punish the Palestinian people
The report states that the revenues of the Palestinian Authority, which form the backbone of the public budget, have become a tool for Israel to punish the Palestinian people through deductions, cuts, and withholding funds, as Israel still has an appetite to steal more money in this area, not to mention the net lending, which has increased unprecedentedly in the last five years. The report also shows that the financial relationship between the PA and Israel is intertwined and overlapping in many areas of that relationship, deepening the lack of transparency and fragmentation, for example: Electricity interconnection points for local authorities, distribution companies, and the private sector, which amount to 250 points, not to mention that Israel receives 500% of the estimated value of the clearing revenue management, after collecting 3% of the clearing revenue as a management fee, although the percentage does not exceed (0.6%) according to the World Bank's reports. Moreover, Israel recognizes the transfer of invoices and clearing only for companies registered with the Palestinian Authority (before the 2007 split), which made many companies established after that unregistered, thus wasting revenues due to the public treasury.
Political will is needed to end the financial hemorrhage and recover the stolen assets of the public treasury
The report recommends the preparation and implementation of a comprehensive national strategy to collect the economic and financial rights of the Palestinian people usurped by Israel, unify action to put an end to the financial bleeding, the emancipation of Israeli control and stealing over Palestinian people’s resources by shifting toward mechanisms that ensure PA’s independence and safeguard its rights to its funds and revenues to achieve economic emancipation. The government needs to devise policies to boost the national economy, increase domestic revenues, decrease reliance on clearance revenues, and apply transparency principles, even at one level related to the publication of agreements and facilitating access to public information. It is also necessary to adopt a computerized system to link financial transactions electronically (electronic clearing) and file international human rights lawsuits against Israel and its open piracy of Palestinian funds. Friend nationals and human rights organizations should be mobilized to file the lawsuit in addition to the one filed by South Africa in the International Court of Justice against Israel.
Clearance crisis between local authorities and state treasury
Economic researcher Kayed Tanbour presented a report titled: “Challenges of Implementing Financial Policies for Clearance between Local Authorities and the State Treasury,” in which he summarized how the occupation stands as an obstacle to clearing of funds between local authorities and the State Treasury, as the former refuses to provide electricity to a single Palestinian entity that handles distribution.
Tanbour pointed to challenges specific to local authorities that make them unable to pay for electricity and water to suppliers, weak procedures for local authorities in managing electricity purchases and distribution, weak supervisory procedures, the decline in citizens' trust in local authorities, the salary bill draining the budget of many local authorities, the Ministry of Finance's lack of commitment to transfer dues to local authorities on time, and weak government support for local authorities. He also listed the challenges related to the state treasury, the lack of data needed for the clearing process, and the high expenditure bill, especially the salary bill, which amounts to half of the expenditures.
The report came up with a set of recommendations, the most important of which are: The need to enforce laws against payment defaulters, reform the electricity and water sectors, starting with identifying the entity responsible for each sector, adopting prepayment meters and incentives to encourage payment, and working on utilizing alternative energy to generate electricity to reduce dependence on the Israeli supplier. from alternative energy to generate electricity to reduce dependence on the Israeli supplier, strengthening governance in local authorities by adopting an administrative and financial system to regulate the local authorities, as well as codes of conduct. Local authorities should adopt more transparent principles in all their work, transparent decision-making mechanisms, administrative and financial procedures, and openness and participation with the local community. The Ministry of Finance must be committed to transferring financial dues to local authorities on time, in order to help local authorities fulfill their obligations, without having excuses to use electricity and water collection funds.
Miscelleaneous comments
Mr. Luay Hannash, from the General Directorate of Customs, Excise, and VAT, commented on the relationship with the Israeli side, which collects 65-68% of local tax revenues, without any transparency in the exchange of information, stressing that the occupation has complete control over accounting matters and that it acquires arbitrary and unjustified collection commissions.
Mr. Majdi Hassan, Director General of the Petroleum Authority, confirmed that there are no proper accounting mechanisms with Israel, that the deductions are made without legal justification, and that the Authority succeeded in reducing the commission for managing the petroleum file to 1.5% only.
Ms. Haya Karmi, Director of the Financial Department of Local Authorities / General Department of Guidance, Control and Budgets, stated that citizens fail to pay their fees with regard to the revenues collected by the local authority, which forced some local authorities to consume the funds generated from water and electricity in projects to develop their towns. Moreover, the Ministry of Finance fails to comply with the revenues it collects from government institutions and others (such as property and professional licenses).
In turn, Dr. Ibrahim Rabayeh pointed to reconsidering the crisis of local authorities as a complex revenue crisis, as there is no capacity for planning, investment, efficient collection, and financial management, including attracting partnerships or predicting revenues, which deepens the clearing crisis. Rabayeh pointed out the need for a political determination since the matter is not only financial. He recommended the creation of an intermediate management and assessment body to assess and redefine the relationship among all parties, which will ultimately require consolidating the relationship with citizens.
