Ramallah, Palestine-The Civil Society Team for Enhancing Pubic Budget Transparency (CSTPBT) held its annual conference on the 2020 public budget via Zoom. Two main focal points were discussed at the conference. The first focused on the financial performance for the first half of the current year, while the second addressed the state and decline of the external financial assistance and foreign aid granted to the public budget. These two issues are especially crucial in light of the economic, political and health challenges Palestinians are currently facing. Decline in foreign aid was most felt in the American support of the budget due to its use as a trade-off and blackmail for Palestinian political positions. Moreover, the Palestinian are constantly faced with the Israeli occupation’s continuation of pirating the (Maqassa) clearing tax money collected at the borders. Last but not least, the imposing Corona virus pandemic added further burdens and challenges as it changed work priorities of public, civil and private institutions.
The conference opened with a statement given by Mr. Magdi Abu-Zaid, Executive Director of AMAN, noting that AMAN is the Civil Society Team’s Secretariat. Mr. Abu-Zaid pointed out the most important issues that characterized the stage in question, such as: the budget’s deficit; increase in the government’s burdens and debts; the private sector’s accumulated commitments particularly small business owners and the impact on layoffs and rise in unemployment. All of the above, said Mr. Abu-Zaid, prompted the Civil Society Team to analyze the mechanism by which the limited resources were managed by the government to meet unlimited needs. After which, the team provided the necessary recommendations that would bring about justice and an optimal management of public funds.
The Civil Society Team is not a substitute for the Palestinian Legislative Council (PLC)
Mr. Abu-Zaid said that although the Civil Society Team is an active body in monitoring and promoting transparency of the public budget, it is not a substitute for the PLC but can be a good support of the oversight role entrusted to it. The Civil Society Team can also be a genuine partner in working towards fiscal policies that are capable of challenging financial crises, realize citizens' priorities and are sensitive to the foundations of social justice.
With this in mind, Abu-Zaid stressed the need for government and civil society representatives to adopt a participatory approach in managing public affairs. In this regard, I am sorry to say that that the principle of community participation in this virtual conference is not well exemplified due to the absence of the Ministry of Finance, he added.
On a similar note, Mr. Abu-Zaid emphasized the right of citizens to be informed and to participate in government policies. He reiterated the Civil Society team and AMAN’s continued demand for the adoption of the Right to Access Information Law, which protects citizens’ right of oversight and accountability.
He concluded his speech by saying that he hopes the President will issue a presidential decree that will set a date for the elections, since it constitutes a pillar for the achievement of democracy and justice in government.
Delay in the Preparation and Approval of the Budget Law is Unjustified.
During the first session of the conference, Ms. Lamees Farraj, researcher and coordinator of the civil Society Team, presented the mid-year report of the public budget taking into consideration the specificity of the current fiscal year. Ms. Farraj also presented a number of the Civil Society comments concerning the budget. She pointing out the broader powers that the 2020 Emergency Budget Law granted to the Minister of Finance in addition to pointing out the delay in the preparation and issuance of the budget, which was due at the beginning of this year. Furthermore, she said that the budget issued was very brief and without an acceptable explanation in addition to the use of unjustified exceptions, which did not include an estimate of the detailed expenses…not even an estimate of the responsibility centers’ budgets, all of which hinders the process of data auditing and accountability. Moreover, the emergency budget was issued without discussing it with representatives of civil society organizations; neither were citizens (the largest source of revenue for the public budget) were informed of it before its approval. This illustrates the Government’s lack of adherence to the participatory approach it repeatedly promised to be committed to, not to mention the absence of the legislative council who has the basic legitimacy to approve the public budget.
Poor Commitment to Budget Transparency; Limited Participation
The first half of the current year was characterized by a continued weak commitment to budget transparency in expenditures (e.g., the highest degree of transparency was not applied in the process of public procurement) even though transparency does not interfere at all with the speed of purchase or in bidding. At the service sectors level, the pandemic exposed the need for improving the Palestinian health system. In this regard, the data showed a decrease in spending on the Ministry of Health during the first half of the year; it fluctuated depending on periods of closures and the cessation of medical transfers to Israeli hospitals. By the same token, no increase in development expenditures was noticed that would indicate a trend towards service development and service localization.
Reducing Poor People’s allowances by 25%
The multiplicity of sources of cash and in-kind support to alleviate the pandemic financial impact reflected the need to allocate additional budgets as assistance to the Ministry of Development and the need to development its database. In this regard, our performance analysis revealed the need to activate the unified aid portal and to ensure channeling all assistance through it. Due to shortages in funds and lack of adequate resources the Civil Society Team recommended adopting a policy of providing assistance to needy groups, and not a compensation policy for those affected. The Team also considers reliance on the local community in the distribution in-kind, emergency and immediate relief assistance.
This year, one out of 4 payments has been transferred to poor families, noting that the number of families has increased by 10 thousand. This brings the total number of needy families that receive cash assistance from the Ministry of Development to 115 thousand, distributed as follows: 80 thousand families in the Gaza Strip and 35 thousand in the West. This spending reduction means depriving poor families from 25% of their allowances. Given the financial crisis, caused by piracy of the clearing tax, it is expected that only three payments instead of four will be provided this year as well; the same number of last year.
Spending Priorities are in Favor of the Security Sector at the Expense of the Health Sector
36.5 million Israeli shekels (NIS) were spent on the security sector during the first half of this year (30 million from external funding, and 6.5 million from the Palestinian Authority, PA); all of which was listed under the heading of rehabilitation of the security services. In the meantime, development expenditures for the Ministry of Health did not exceed the 10 million NIS. This raises many questions concerning priorities for development spending in light of the current pandemic, and specifically priorities that are defined by the Palestinian government without any external interference. Moreover, figures in the first half of 2020 indicated that there was an unjustified increase in salaries of the security sector employees versus an unjustified decrease in salaries of other sectors’ employees.
Relatively Small Decline in Revenues versus Rise in Public Debt
As for the decrease in revenues during the first half of the year compared to the same period in previous years, the closure did not have a severe impact on revenues during this period. It also important to note that the decline was relatively small compared to the budget estimates, since taxes and revenue are usually higher during the first quarter of the year. The figures showed a decrease in the actual expenditures, compared to the estimated. This was due to the lower operational expenditures, affected by the status of closures, and the decline in the salaries and wages, due to the clearing tax crisis that arose at the beginning of May, where the Israeli occupation did not transfer the clearing tax funds. As for the public debt, it recoded an increase at the end of June 2020 reaching 10.6 billion NIS. It is expected to rise further until the end of the year, noting that the public debt and the figures mentioned do not include arrears either for the private sector or the pension authority.
Size and Percentage of Grants and Assistance for the Public Budget (2010-2019)
The second report of the first session was an assessment of the size and percentage of grants and assistance granted over the past 10 years (2010-2019). Researcher Moayad Afana, a member of the Civil Society Team, reviewed the total amount of external funds obtained by the PA for the public budget over the past 10 years, which amounted to 34 billion NIS. 29 billion NIS of those went to support the public treasury, accounting for 85.5% of the total external funding. While 5 billion NIS went to development funding, an equivalent of 14.5% of total external funding.
37% Reduction in the Actual External Funding from (2010-2019)
In a review of past years, there has been a marked decline in grants and assistance to the public budget, whether in terms of external support for the public treasury or support for the development expenditures. In this regard, the actual external funding for the public budget was clearly on the decline, where it amounted to 4,762.8 million NIS in 2010 compared with 1,745.5 million NIS in 2019; a decrease of 36.6% from 2010. Mr. Afana discussed, both, grants and foreign aid support for the public budget, "treasury funding and development financing" confirming the decrease. In addition, he pointed out that there is also a gap between the estimated budget of grants and foreign aid, and what is actually achieved where the achieved is much lower than estimated. This is due to the dependence of external funding on political agendas of donors. Moreover, Arab funding remains limited and unpredictable, which cancels the idea of the existence of an Arab safety net to support the public budget. All of the above casts a dark shadow on the future of external support, which requires decision makers to provide alternatives. It also requires that the Ministry of Finance must address this issue through proper and realistic planning of the public budget.
External Funding is Subject to the Donors' Political Agendas
Mr. Afana paused concerning the issue of external financing that is linked to political paths and is directly influenced by international, regional and local political agendas, which is used as means to pressure the PA. This in turn, he said, threatens the sustainability of funding. It also jeopardizes the already granted funds to be repossessed by the donors. Examples of the fragility and instability of external support for development expenditures include: in 2019, the American government reclaiming of the development grant of 558 million NIS, an amount that exceeded all the development support achieved in 2019. In addition, the United States has suspended direct aid to the public treasury, indefinitely.
Impact of the Decline in Grants and Foreign aid on the Social Services in Palestine
The decline in external support directly affects the implementation of government plans and programs for the social sector, hence affecting the government’s ability to meet its obligations towards that sector. In addition, this decline accompanied by the financial crisis that the Palestinian government is experiencing undermines the efforts of the government and the Ministry of Social Development to make the transition from being relief-oriented to development oriented. At the same time it works to deepen reliance on relief assistance since it provides instant help in light of the current financial difficulties and high poverty rates. Furthermore, the decline in external funding has also negatively affected many projects and programs for social services, especially since development projects depend heavily on donors. This requires that plans for the social sector be flexible in order to keep pace with fluctuations in the public budget in accordance with the turbulent political and economic realities.
The European Union (EU) support also declined, noting that the EU is the biggest supporter of the public treasury and the social sector. Examples include support for: salaries of civil servants, social cases and hospitals in Jerusalem. The decline chewed more than half of the total amount needed, as figures show it went from 1,397.3 million NIS in 2010 to 641.3 million NIS in 2019. As obvious, social services covered by this funding were largely and substantially affected. Moreover, the World Bank support, the second largest contributor, also sharply declined. Its funding went to support aid packages for the social sector and the social protection network. In 2010, it reached 1,064.2 million NIS, while in 2019 it fell to 212.1 million NIS, amounting to approximately a fifth only, 20%.
Government Must Adopt Alternatives Means to the Declining External Funding
The Civil Society Team recommends that the Palestinian government adopt alternatives to external financing as it stands, by looking into other prospects of financing with other countries. Furthermore, the government must comply with good governance principles in its management of public funds, first and foremost by rationalizing expenditures, especially in light of the decline in external funding and the successive financial crises affecting the PA.
The Civil Society Team also recommended that the Ministry of Finance adopt a flexible planning methodology for the public budget that takes into account the systematic and irregular risks and dangers surrounding the Palestinian reality. The Team also stressed the need to work on "localizing" development projects of the social sector by providing local sources of funding to avoid being dependent on external financing. This can be achieved through the private sector social responsibility programs, or through the Palestinian government’s maximizing of its domestic revenues without affecting the poor, marginalized and low-income groups. Providing alternatives to the loss of external funding can also be through imposing tax policies that expand tax brackets by creating high income brackets; expanding the taxpayers’ circles, which contributes to the promotion of tax justice. Finally, the government should adopt "revolutionary" measures towards investing in the social responsibility of the private sector by unifying these resources and investing in them to promote social services.
**It is worth mentioning that the second session of the Budget Conference 2020 will be held via Zoom on Monday, October 12, 2020. Sessions will revolve around the forms of financial leakage and losses incurred by the PA.
