Budget Conference 2025: The Civil Society Team for the Enhancement of Public Budget Transparency monitors public finance performance
Financial Reform and Fari Burden Sharing Boosts Citizens’ Confidence in State Institutions
Ramallah – The Civil Society Team for the Enhancement of Budget Transparency held its annual conference for 2025, with notable attendance by representatives from the government, civil society, the private sector, and international organizations. The conference provided a forum for dialogue on issues related to public financial management in light of the suffocating financial crisis, which is worsening and affecting the lives of citizens and government services as a result of the occupation and its piracy of clearance funds. The financial crisis now affects every Palestinian household and threatens economic security. Thus, the conference represents an important step towards producing practical recommendations to strengthen the foundations of resilience and distribute the burden fairly among the various segments of society.
The conference was divided into two sessions. The first session was devoted to presenting the government's budget management during the first half of the year and ways to activate the role and contribution of the private sector through social responsibility programs in supporting the continuity of public services. It also discussed forms of financial leakage that deprive the treasury of more than $1 billion annually and proposed mechanisms to limit it. The second session focused on the reality of governance in public companies wholly or partially owned by the Palestinian government, and on the status of government assets and investments inside and outside Palestine, including the legal and institutional frameworks and the returns achieved from them.
Al-Husseini: Financial Reform, Rationalization of Public Spending, Enforcement of Governance and Oversight: A First Step to Increase Citizens’ Trust
Abdul Qader Al-Husseini, Chairman of Board of the Aman Coalition, opened the conference by emphasizing that continuing reforms, promoting transparency, and expanding national and community consultations are necessary to strengthen resilience and address these challenges.
He referred to the recent World Bank report on the Palestinian Authority's limited ability to control economic policy instruments due to the occupation's policies and the accompanying increased need for donor support to ensure the continuity of vital public services.
Al-Husseini emphasized that the civil society team views fiscal reform, rationalization of public spending, and effective governance and oversight as essential for strengthening citizen confidence and improving services, particularly in the health, education, and social protection sectors. He stressed that the occupation is not only waging a military war, but also a war of economic extermination that requires integrated and participatory action to confront it.
Occupation Authorities Withhold Over ILS 10.5 Billion
The report addresses the impact of occupation practices, particularly the piracy of clearance funds, which have not been transferred for four months, noting that the seizure process began in 2019 with a Knesset decision to deduct 52 million shekels per month, resulting in the freezing of more than 10.5 billion shekels to date.
Contingency Budget to Stabilize Vital Sectors, Such As Health, Education, Security, and Social Protection
The report explained that the repercussions of the war and economic blockade led to a decline in gross domestic product and a deepening of the financial crisis as a result of the drying up of resources and a decline in external support. prompting the Palestinian government to approve an emergency budget for 2025 amounting to 20.6 billion shekels, with a significant funding gap of 6.9 billion shekels. This budget was based on three main pillars: conservative financial projections that reflect the cumulative decline in GDP, the implementation of a monetary policy that determines spending priorities according to government priorities, and the provision of the necessary liquidity to maintain the stability of vital sectors such as health, education, security, and social protection.
Reform and Austerity Measures
The report indicated that the government announced a package of financial reforms that included reviewing institutional structures by merging and abolishing institutions to reduce expenses, adopting a job rotation policy, and addressing security personnel inflation through restructuring. The government also began tax reforms, passing a value-added tax law and pledging to review the income tax law, in addition to continuing the austerity measures announced last year, such as halting expropriations and vehicle purchases, reducing operating and capital expenditures, and stopping the payment of illegal privileges.
Increasing Salaries Bill and Deterioration of the Quality of Services
The report noted that the government succeeded in reducing total expenditure during the first half of the year to 44% of the estimated budget, but fundamental issues remain unaddressed. The payroll bill remained high, accounting for more than half of the budget, while cuts were made at the expense of the most vulnerable groups, such as social transfers to poor families, alongside a decline in service quality due to reduced working hours and non-payment of public service costs, not to mention a decline in capital expenditures that had no impact on the budget.
Delay in Purchasing Medicines and 90,000 Poor Families in the Strip Deprived of Cash Assistance Program
The report pointed out that the Ministry of Health was among the most affected, as its operating expenses did not exceed 37% of the estimated amount, which negatively affected the purchase of services, medicines, and supplies. This was accompanied by a reduction in the working hours of government clinics to only two days a week. The Ministry of Social Development saw a sharp decline in transfer expenditure, with only four payments made during the first half of the year, limited to about 31,000 families in the West Bank alone. Moreover, 90,000 families in the Gaza Strip were denied any transfers, despite the doubling of the number of people in need as a result of the war of extermination. This was due to many reasons, including the occupation's practices of preventing the Authority from working in the Gaza Strip.
Security Sector Exception
The report explained that the Ministry of Security was an exception to the austerity measures, accounting for 21% of the budget and seeing an increase in its operating expenses, with the announcement of new jobs in the security sector, which kept the payroll bill high. It also pointed to a significant increase in public debt servicing, which is expected to continue to rise in the coming months, adding an additional burden on the public treasury and threatening the sustainability of vital funds such as the pension fund.
Key Recommendations: Intensification of National and International Efforts to Pressure the Occupation Authorities Through International Courts to Release Clearance Funds
The report provided recommendations focusing on intensifying national and international efforts to pressure the occupation authorities to release clearance funds by having recourse to international courts and friendly nations. It also recommended controlling spending by addressing the salaries bill and applying a zero-appointment policy. It further suggests the reform of the taxation system to expand the taxbase and combat tax evasion. The report also calls for solving the indebtedness of the Pension Authority via legal reforms to ensure its sustainability. It also recommends a gradual disengagement of the Israeli economy by promoting local production and alternative energy. The report also emphasized the necessity to carry out internal housekeeping and reprioritize budget allocations to serve the most vulnerable. Adopting universal mandatory health insurance is recommended to ensure sustainable health sector funding.
Financial Leakage Exceeds USD 1 Billion Per Year
Researcher Kayed Tanbour presented a report on “Forms of Financial Leakage and Losses Endured by the Palestinian Authority in its Relationship with Israeli”. He explained that the Palestinian National Authority is undergoing a structural financial challenge due to the size and persistence of the financial leakage because of the unequal relationship with the Israeli side created under the Paris Economic Protocol and subsequent unfair financial and procedural arrangements.
The report found that the annual financial leakage is estimated at USD 1.739 billion, representing 35.96% of the total public revenues for the year 2023, which amounted to USD 4.836 billion. This amount represents around 11.6% of the GDP.
The most salient leakage channels include Israeli economic activities in the areas classified as (C), which ranges from USD 900-1,200 million a year. Other channels include the taxes deducted on Palestinian workers, which exceed USD 419 million per year and taxes on fuels (USD 129 million), in addition to the departure tax through Al-Karama Bridge and administrative commissions on fuel tax revenues.
Repercussions of Financial Leakage:
The report asserted that the financial leakage is a major cause of the financial deficit in addition to having direct impact on the citizens’ standard of living and public services quality. It noted that the financial leakage due to the withholding of clearance funds was the most dangerous as it compromises the backbone of Palestinian revenues, of which clearance funds constitutes over 60%. The non-transfer of these funds drains the public finance and comprises the ability of the government to fulfill citizens’ basic needs. The report reiterated that solving this problem is an utmost priority at both national and international levels because it has a direct impact on budget stability, the quality of public services, and the PA’s flexibility in making economic and developmental decisions.
Piracy of the Palestinian People’s Funds Turns into an International Legal Dispute
The report also pointed out the importance of working on gradual financial alternatives to reduce dependence on clearance funds, including expanding the local tax base, improving internal revenue management, and stimulating productive investment capable of generating sustainable revenues, thereby contributing to strengthening public financial independence and the Authority's ability to cope with crises. The report also recommended strengthening financial oversight and transparency mechanisms to limit the effects of this financial leakage and reduce future risks to Palestinian public finances. The report emphasized the importance of developing an integrated national system for monitoring revenues and tracking deductions on a regular basis, based on standardized databases and independent auditing mechanisms that ensure accountability and enhance the ability to formulate financial and economic policies based on accurate data. All this is in addition to the need to activate diplomatic and legal efforts to internationalize the issue of illegal deductions by presenting it to relevant international institutions, including the United Nations and international financial institutions, as a violation of the Paris Protocol and the provisions of international law.
Institutionalizing Private Sector’s Corporate Social Responsibility
On another note, researcher Muayad Afana, a member of the civil society team, presented his report entitled "Social Responsibility of the Private Sector... and the Need to Institutionalize It," in which he pointed out that social responsibility is no longer limited to providing assistance, but has become a fundamental criterion in evaluating companies' performance in terms of their commitment to society and the environment, especially in light of the worsening economic and social challenges, specifically in the wake of the Israeli aggression on the Gaza Strip and the economic downturn in the West Bank.
The report pointed to the absence of a legislative framework regulating social responsibility in Palestine, despite the issuance of the new Companies Law in 2021, which weakens the developmental impact of current contributions, which are mostly focused on relief efforts.
In light of the financial crisis facing the Palestinian Authority and its debt reaching approximately $13.5 billion, the report emphasized the importance of passing legislation that regulates the mechanisms of spending related to social responsibility based on the priorities and vital needs of citizens, especially in light of the tax breaks it enjoys. The report also recommended the launch of a national social responsibility strategy, including expanding community consultations between the private, public, and civil sectors on the idea of establishing a unified fund into which companies' contributions would be deposited, managed by an independent body, and in accordance with clear standards of governance, transparency, and integrity, while ensuring fairness in distribution and avoiding a temporary relief approach.
Majdi Al-Hassan: Austerity Measures and Enhanced Revenues Despite Israeli Restrictions
Magdy El-Hassan, Deputy Minister of Finance, said that the performance of the general budget during 2025 came within the framework of a clear austerity policy, represented by strict measures, most notably the suspension of new appointments, and the adoption of early retirement in the security agencies, with the aim of reducing the payroll bill, noting that this bill still constitutes a significant burden on public finances.
Al-Hassan explained that income tax revenues rose by 34% and customs revenues by 16% during the first half of the year, with local tax collection showing a marked improvement, supported by a change in customs control behavior. There has also been an improvement in cigarette smuggling, where the state's losses were previously estimated at one billion shekels, while cigarette collection rose by 54% during the first six months of the year, and the Jerusalem Cigarette Company recorded a 9% increase in imported quantities and a 16% increase in revenues.
With regard to financing, Al-Hassan pointed out that the Ministry of Finance was forced to obtain advances from banks in December 2024 to cover employee salaries, which affected the financial performance reports for January 2025.
Al-Hassan also explained that the ministry is currently working to expand the tax base, which has increased from 36% to 56% since the beginning of the year, despite complaints from the private sector due to accumulated deductions from previous years. He also noted that the unification of tax procedures and the implementation of the value-added tax increase law played a role in improving revenues.
Al-Hassan added that the fuel sector has undergone a major transformation, noting that in 2018, petroleum sales revenues amounted to only about 60 million shekels due to unprecedented smuggling. However, he emphasized that the ministry succeeded in reducing the price of diesel by one shekel, which contributed to reducing smuggling and increasing sales, raising revenues to 80 million shekels, in a clear example of the impact of smart policies in boosting revenues without increasing the burden on citizens.
Ahmed Al-Qadi: The Private Sector Invested in Corporate Social Responsibility Programs In spite of the Economic Recession
Ahmed Al-Qadi, Representative of the Contractors’ Union, pointed out that the private sector is facing tremendous burdens under the harsh economic conditions with increasing unemployment rates, disruption of labor flow into Israel, in addition to accumulated government arrears under the financial crisis. He noted that most companies stand unable to fulfil their obligations. Notwithstanding these challenges, the private sector continues its CSR programs to support many sectors. He called for establishing a CSR Fund based on community consultations with the private sector, government and civil society in order to fairly share the burdens.
Click here to watch the first session.
Unfair Agreements and their Impact on Governance
During the second session of the conference, researcher Bakr Ishtayyah presented a report entitled: “The Reality of Governance in Government-Owned Public Companies in Palestine,” reviewing the reality of governance in public companies wholly or partially owned by the Palestinian government, measuring their commitment to the principles of integrity, transparency, and accountability, identifying strengths and weaknesses in their governance practices, and providing recommendations for reform to enhance institutional performance and improve the quality of services provided to citizens.
The report showed that public companies owned by the Palestinian government suffer from institutional fragmentation and the absence of a unified legal framework, as a result of the multiplicity of owners and supervisors, and their establishment through different legal channels, which has led to weak coordination and inconsistency in the application of transparency and accountability standards. It also points to the weak independence of many of their boards of directors and the difficulty of holding executive management accountable, in the absence of effective legislative oversight and reliance on non-binding reports issued by the Audit Bureau. The report also highlighted low compliance with the governance code, poor publication of financial reports and budgets, a lack of public awareness of the role of these companies, weak community oversight, declining coordination with the Ministry of Finance on revenues, and limited oversight staff in regulatory bodies such as the water and electricity sectors.
Promulgation of a Comprehensive and Unified Legislation on Public Companies Governance and Adoption of a Clear Policy on Conflict of Interests
The report recommended the adoption of comprehensive and unified legislation for the governance of public companies, with a legal mechanism for transferring the profits of these companies to the public treasury to support financial stability and direct resources toward national priorities. The report also emphasized the need to enhance transparency and accountability by adopting clear policies on conflicts of interest, gifts, financial disclosure, and reporting corruption, in addition to requiring companies to publish their financial and administrative reports periodically on their official websites. The report also focused on the importance of issuing a special law on the Palestinian Investment Fund as a sovereign fund, defining its relationship with the general budget, requiring it to comply with international governance standards, monitoring the performance of its subsidiaries, and developing effective channels for receiving complaints from citizens.
Government Assets: Underused National Wealth
In his report, Dr. Nasr Abdel Karim reviewed that Palestinian government assets—including land, buildings, vehicles, and the investment fund—represent significant sovereign wealth, but there is a clear gap between their actual size and economic returns due to the absence of a unified strategy, weak governance, multiple authorities, and the obstacles posed by the occupation. Despite the existence of laws such as the State Property Law (2021) and the Leasing System (2023), these frameworks lack implementing regulations and transparency in asset pricing and contract publication. Management institutions, such as the Ministry of Finance, the Land Authority, and the Investment Fund, suffer from overlapping powers and weak coordination. The State Administrative Audit and Control Bureau (SAACB) reports significant weaknesses in asset governance, such as the absence of electronic systems, misuse of government vehicles, and weak internal controls, leading to waste of resources, lack of accountability, and undermining trust in public institutions.
Challenges Related to State Land Management, and Structural Flaws in Government Vehicles Management
The Land Authority achieved progress in developing tracking system and creating geo-spatial databases; however, SACCB Report of 2023 unveils lacuna, including the absence of a clear investment plan, mixed-up revenues, and non-codification of assets. This situation undermines the ability to track and compromises transparency. The Auditing also reveals misuse of government vehicles and legal breaches, including use outside official working hours or using a civil license plate in addition to high operational cost and ongoing disbursement of allowances to employees who have government vehicles. Moreover, internal control is weak, and trust records are not consistent.
Establishment of an Independent National Agency for the Management of State Property to Enhance Asset Management
The report called for comprehensive institutional reform of government asset management, including the establishment of an independent national property and asset management authority and the updating of legal frameworks, including the mandatory publication of contracts and investment returns. It also recommended developing a long-term national strategy for asset investment and establishing a sovereign fund to finance sustainable productive projects. The report emphasized the need to enhance transparency by launching a unified electronic platform for asset documentation and electronic payment, in addition to eliminating paper transactions and linking government vehicles to tracking systems to control their use.
Al-Diessi: The Water Regulatory Council Lacks Support, Funding, and Authorities Despite its Role in Regulating the Water Sector
Riyad Al-Disi, representative of the Water Sector Regulatory Council at the conference, explained that the water sector faces historic challenges such as significant losses, unfair distribution, differing tariffs, and water theft, in addition to the impact of occupation practices. He considered that the Council's ability to continue is an achievement, but it has not been able to carry out all of its tasks as defined by law, the most important of which is monitoring all activities of water and sanitation service providers.
Al-Disi identified four key factors for empowering the Council: political support, adequate funding, a legal framework, and institutional capacity building. Al-Disi explained that political and financial support remains insufficient and that amendments to the law have reduced the council's powers (such as withdrawing the authority to issue tariffs and licenses in favor of the prime minister). He also pointed to the weakness of financial resources, as the council relies on license fees without a binding mechanism for collecting them.
On the other hand, Al-Disi noted that the Council suffers from a shortage of human resources and a lack of job security, which has led to a loss of talent in recent years. He pointed out that government funding is also limited and intermittent, with the Council receiving only modest support, most recently in 2021. He concluded by emphasizing that the Council's success depends on providing sustainable funding through license fees, linking them to clear conditions related to service quality, not to mention reducing waste and ensuring fair tariffs that cover costs and remain acceptable to citizens.
Mohammad Khalifa: The Need for a Comprehensive Legal Reform of the Governance of Government Assets and Companies
Mohammed Khalifa, representative of the Anti-Corruption Commission at the conference, emphasized that the issue of public assets, particularly government land and its investment, suffers from legal and administrative problems related to the multiplicity of functional titles and powers. This requires fundamental legal reform and a participatory effort at the state level. He praised the Cabinet's attention to this issue, but stressed the need for greater and more profound action to maximize the benefit of national assets.
Regarding state-owned companies, Khalifa pointed out that internal and external auditing is one of the fundamental pillars of corporate governance. He emphasized the need to amend the corporate governance code to ensure the effectiveness of the board of directors in leading governance, while activating the role of the general assembly and integrating the roles of all stakeholders.
He explained that legal uncertainty remains regarding the application of various laws to public companies, such as the Companies Law, the Anti-Corruption Law, the Financial and Administrative Control Law, the Securities Law, and the Competition Law. He stressed that companies must comply with all these laws, especially since their employees are subject to the provisions of the Anti-Corruption Law.
He also pointed out that there is a special conflict of interest regulation issued by the Council of Ministers in 2020, which all government companies must comply with, calling for a comprehensive review of the extent to which these companies comply with the applicable legislation. Khalifa concluded his speech by emphasizing the importance of public-private partnerships as a necessary approach to addressing economic challenges and stimulating growth, as is the case in other countries around the world.
In a follow-up comment, Dr. Azmi Al-Shuaibi, advisor to the Aman Coalition's board of directors on anti-corruption affairs, noted that the Ministry of Finance is still in the process of collecting data on Palestinian state assets. He added that he expected serious accountability to begin next year regarding the inventory of these assets. He explained that the separation between providers and regulators in the electricity and water sectors is a sound policy for achieving good governance and avoiding conflicts of interest. However, he criticized the weak implementation of these policies, which increases opportunities for corruption. He also pointed to several other problems surrounding the appointment of boards of directors in government-owned companies and highlighted that companies affiliated with the Palestinian Investment Fund are enduring losses. There isn’t a real will to follow up on Palestinian assets or monitor the performance of companies owned by the Palestinian people, despite reports by the State Administrative Audit and Control Bureau (SAACB) that highlighted this. He reiterated the need for diligent follow-up and a serious commitment to addressing the issue.
Click here to watch the second session
