Executive Summary

On February 15, the government of Israel approved a process to register land in the occupied West Bank as Israeli “state property.” The decision builds on a cabinet resolution introduced in May of 2025 that established the framework for renewed land settlement proceedings on Palestinian land.

Implemented for the first time since Israel’s occupation of the West Bank in 1967, this process enables Israeli authorities to declare land ‘state property’ when Palestinian ownership cannot be formally proven; a standard difficult for many Palestinians to meet. Even when landownership can be met, expropriative policies such as the Absentee Property Law allows Israel to confiscate Palestinian property and sell it to Israelis. A total of NIS 244.1 million has been allocated for this program, which has been stated to continue for decades. Israeli Government Resolution No. 3559 sets a first-phase objective of registering 15% of previously unregulated land within five years. [1]

This development follows the Israeli cabinet’s February 8th approval of a series of measures that expand Israeli control over land administration and acquisition in the West Bank, undermining the Palestinian Authority (PA) and amounting to de facto annexation. The details of the measures have not been released to the public, only communicated through a press release by government ministers.

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Introduction

Palestinian women in Gaza are subjected to overlapping forms of violence by Israel that converge into a single, coherent structure of domination. Starvation, sexual and gender-based violence, and reproductive violence do not occur as isolated abuses, but as an interlocking system enacted simultaneously and reinforcing one another. These practices operate across psychological, social, and biological dimensions of harm. While Palestinian women’s bodies are the immediate site of this violence, its intended target is Palestinian society as a whole. By systematically targeting women, Israel undermines collective survival, erodes social cohesion, and attacks the continuity of Palestinian life itself. Taken together, these practices constitute a gendered architecture of genocide that must be recognized and addressed as such.

The Palestinian Initiative for the Promotion of Global Dialogue and Democracy (MIFTAH) has documented these three crimes throughout Israel’s genocide in Gaza. Firsthand testimonies collected from the Gaza Strip and the occupied West Bank reveal the distinctly gendered impacts of these violations and their cumulative effects on Palestinian women.

I. Sexual and Gender-Based Violence

Sexual and gender-based violence is systematically instrumentalized by Israel as a means of humiliating and isolating Palestinian women while dismantling family and community bonds. These violations should not be understood as isolated or aberrational incidents, but rather as part of a broader historical pattern in which sexual violence has been deployed as a tool of terror and social control against the Palestinian population.

Historical records document that during the 1948 ethnic cleansing of historic Palestine, Zionist paramilitary forces including the Haganah engaged in acts of sexual violence alongside mass killings and expulsions of Palestinians. The Haganah later became the institutional foundation of the contemporary Israeli military. This historical continuity underscores how sexual violence has long functioned as a weapon of war, embedded within military practices aimed at terrorizing civilians and facilitating population displacement.

Testimonies collected by MIFTAH fieldworkers across the West Bank and Gaza Strip reveal recurring patterns. Arrests conducted in family homes routinely transform domestic spaces into sites of domination. Soldiers storm houses, often in the middle of the night, restrain family members, destroy personal belongings, steal valuables, and dictate all movement within the home. Male relatives are frequently forced to witness or participate in the abuse of female family members, a tactic designed to emasculate men and dismantle the household from within.

Sexual violence also functions as a form of psychological torture in Israeli detention and interrogation settings. Alongside sleep deprivation, starvation, and physical assault, sexual violence is deliberately employed to induce psychological breakdown and assert total control. Testimonies describe forced strip searches, removal of hijabs, invasive bodily touching, slut-shaming, and explicit threats of rape against detainees or their relatives . Testimonies collected by the Palestinian Center for Human Rights (PCHR) describe in detail the systematic use of secual torture in Israeil detention settings. Sexual violence is further enacted through blackmail, including the use of nude or indecent photographs taken during interrogation to coerce compliance or enforce silence. These practices aim to strip women of dignity, break them psychologically prior to or during interrogation, and inflict lasting harm that weakens their sense of self long after release.

The full extent of sexual violence against Palestinian women today remains difficult to quantify, as survivors rarely disclose sexual assault or rape causing underreporting to be widespread. This silence reflects structural, legal, and social barriers rather than the absence of abuse. Palestinian survivors of violence perpetrated by Israeli soldiers or settlers seldom pursue legal avenues due to the well-documented lack of accountability within Israeli law enforcement mechanisms, where investigations rarely result in prosecution or redress .

Social stigma also plays a role in silencing survivors. In a predominantly conservative social context, sexual violence carries stigma that extends beyond the survivor to her family and community. Israeli forces exploit this reality deliberately, using sexual violence and threats to women’s “honor” as mechanisms of coercion, intimidation, and social fragmentation. In this way, sexual violence operates not only as an assault on individual women, but as a strategic instrument of collective harm.

II. Reproductive Violence

Reproductive violence targets women’s capacity to give life through the systematic destruction of healthcare systems, maternity services, and the material conditions necessary for survival. It refers to deliberate actions intended to impair an entire population’s ability to reproduce and sustain itself. In Gaza, reproductive violence is not incidental to armed conflict; it is enacted through policy-driven destruction that reflects intentionality rather than collateral harm.

This violence is carried out through the systematic targeting of life-sustaining infrastructure, including hospitals, maternity wards, neonatal units, fertility clinics, and embryo preservation centers, as well as the blockade of medicines, medical equipment, and hygiene supplies. The consequences are visible in rising maternal mortality, increased miscarriages linked to malnutrition and extreme stress, untreated reproductive infections, and the repeated displacement of pregnant women seeking care within a collapsing healthcare system .

These measures directly undermine women’s ability to safely conceive, carry pregnancies to term, give birth, and raise children. Women’s reproductive health is further compromised by the deliberate obstruction of humanitarian aid and the collapse of sanitation and water infrastructure. The destruction of healthcare facilities, combined with ongoing bombardment and repeated displacement, has rendered movement dangerous and unpredictable, making access to medical care nearly impossible and severely limiting the ability of humanitarian organizations to provide reproductive and maternal health services.

As a result, there has been a sharp increase in preventable reproductive health complications. Women report rising cases of fever linked to untreated vaginal infections caused by inadequate hygiene and the absence of feminine hygiene products, as well as unnecessary hysterectomies . Women using intrauterine devices experience prolonged bleeding and infections due to unsanitary living conditions, yet no options for safe removal currently exist in Gaza, posing serious long-term risks to reproductive health and bodily integrity . Women have also been forced to undergo emergency hysterectomies to control excessive post- partum bleeding that could not be managed due to the lack of healthcare.

Reproductive violence in Gaza is therefore both biological and symbolic. It constitutes an assault on the present population and on the possibility of future generations. The objective of preventing Palestinian continuity is further evidenced by the sustained and disproportionate killing of children, who have consistently been the most targeted demographic group throughout the genocide. This killing is reinforced by an ideological framework that dehumanizes Palestinian women and children. Public statements by Israeli political and military officials have repeatedly framed the killing of women and children as militarily justified . Within this logic, women are targeted not for their actions, but for their reproductive capacity and their role in sustaining Palestinian continuity. Such rhetoric has informed and legitimized military operations in Gaza. Throughout the genocide, civilian spaces including schools, homes, and hospitals, have been deliberately targeted as a matter of state policy. These are precisely the spaces where women and children sought refuge. The systematic killing and endangerment of women and children is not a secondary effect of warfare but a central component of the broader genocidal strategy.

III. Starvation as a Weapon of Genocide

Another grave factor to the reproductive health of women in Gaza has been starvation. Prolonged malnutrition, combined with physical exhaustion, repeated displacement, and lack of healthcare infrastructure, have contributed to increased miscarriages, loss of amniotic fluid, and heightened maternal mortality . Numerous women have reported using prenatal supplements distributed by humanitarian organizations as meal substitutes for themselves or their families, or exchanging them for food and essential supplies. Breastfeeding has become increasingly difficult due to suppressed milk production associated with undernourishment, while infant formula remains largely inaccessible, placing newborns at heightened risk. Chronic stress and nutritional deprivation have also resulted in amenorrhea, fertility complications, and potential long-term reproductive harm.

For women in Gaza, starvation functions not only as a form of biological deprivation but as a structural assault on familial roles, social reproduction, and dignity. It undermines women’s capacity to fulfill caregiving responsibilities, destabilizes family life, and produces severe physical, reproductive, and psychological consequences. Women disproportionately experience the embodied impacts of hunger while simultaneously carrying the emotional labor associated with sustaining children and dependent family members.

Testimonies collected by MIFTAH from displaced women subjected to Israel’s forced starvation consistently begin with descriptions of pre-displacement life, including homes, employment, family routines, and domestic spaces. The loss of the home, particularly the kitchen, emerges as a recurrent theme, reflecting the erosion of women’s agency and identity. The destruction of homes and domestic spaces traditionally associated with women’s autonomy has contributed to a marked erosion of dignity and self-perception. Reported symptoms include anxiety, insomnia, hair loss, emotional dysregulation, and post-traumatic stress, with many women suppressing their own distress to maintain caregiving roles.

Repeated displacement has further exacerbated women’s vulnerability. Multiple forced relocations have resulted in the loss of personal possessions, kinship networks, and community-based support systems. Overcrowded shelters lack adequate privacy, sanitation, and safety, compelling women to manage childcare and food preparation under unsafe and degrading conditions. Everyday survival practices are thus shaped by constant exposure to risk and instability.

For women who serve as the primary caretakers of their families, providing for loved ones often comes at great personal risk. They are frequently reducing or skipping their own meals so that their children can eat, often continuing caregiving responsibilities despite severe physical exhaustion . In displacement, they prepare rudimentary meals using limited ingredients and improvised methods, such as cooking lentils over burning toxic materials like plastic. These practices function both as survival strategies and as efforts to maintain a sense of continuity and stability for children amid profound disruption. In these contexts, women disproportionately bear the responsibility of caring for sick, injured, or disabled family members, despite acute shortages of medical care, clean water, and shelter. Overcrowding and unsanitary conditions contribute to widespread illness, while attempts to obtain food or humanitarian assistance expose women and children to ongoing risks of injury or death.

Starvation has additionally intensified gendered pressures within households. Men’s inability to secure food or protection has been associated with increased psychological distress, thereby expanding women’s emotional and caregiving responsibilities. For women whose spouses have been killed, detained, or disappeared, starvation enforces sole provider roles under conditions that systematically undermine the possibility of survival.

Conclusion

MIFTAH has documented violations of sexual violence, reproductive violence, and starvation at various points during the genocide in Gaza. These violations, however, do not occur in isolation; they operate simultaneously, reinforcing and amplifying one another as part of a single system of control. Sexual violence isolates women from themselves and alienates them within their communities. Reproductive violence deliberately targets women because of their childbearing roles. Starvation acts as both a biological and psychological assault. Taken together, these crimes compound one another, deepening harm and undermining the survival of Palestinian women and their communities. A single woman may experience all three forms of violence, being violated in detention, displaced and denied healthcare, and later starved while unable to feed her children. Together, these crimes transform daily life into a persistent site of punishment. They attack the Palestinian female spirit, disrupt women’s societal roles, and, in doing so, fracture society across generations, making recovery increasingly difficult.

The failure to confront these violations reflects a long colonial history, in which the rhetoric of “saving women” was used to justify empire while violence against women perpetrated by colonial powers was silenced or dismissed. To resist normalization and impunity, these crimes must be recognized and addressed as mutually reinforcing acts of genocide. Understanding these violations as an interconnected system of oppression is essential to grasp their full impact on Palestinian society. These gendered crimes are not about women alone; they aim to dismantle the foundations of Palestinian life. Women are targeted not only as individuals but as mothers, community anchors, and bearers of generational continuity, while Palestinian society is systematically weakened and broken at its core.

Sources and References

Executive Summary

On 17 November 2025, the United Nations Security Council adopted Resolution 2803, establishing a new governance framework for Gaza. The resolution endorses U.S. President Donald Trump’s Comprehensive Plan to End the Gaza Conflict (CPEGC) and the creation of a transitional international administration through a U.S.-led Board of Peace (BoP) and authorizes an International Stabilization Force (ISF). Rather than ensuring Palestinian sovereignty, this framework transfers control of Gaza’s civil administration, security, reconstruction, borders, and humanitarian aid to external actors, entrenching foreign oversight and further consolidating Israeli dominance over the occupied Palestinian territory.

This resolution raises grave legal and political concerns. It departs from foundational principles of international law and undermines the Palestinian people’s inalienable right to self-determination. By providing no mechanisms for accountability for Israel’s documented violations, offering no concrete safeguards for Palestinian rights, and presenting an undefined framework with no clear timeline or benchmarks, Resolution 2803 risks perpetuating systemic injustices, enabling a reconfigured form of occupation, and further entrenching the colonial-style control already in place.

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The formal financial sector in WBG emerged some 15 years ago, after 1993-1994 with the signing of the Oslo Accord in 1993 and the Paris Protocol in 1994. The latter provided Palestinians the authority to administer monetary and financial affairs in order to support the expected economic growth.

Those expectations were never fully realized because of on-going restrictions on mobility of persons and goods and on access to natural and financial resources imposed by Israel. In the last several years the Palestinian economy has been in steady decline. Per capita GDP is estimated to have fallen by nearly 30.0 percent from its height of USD 1610 in 1999 to around USD 1,130 in 2006. Except for a short period between 2003 and 2005, when the economy was recovering, growth was negative every year since 2000. During the last two years the decline has accelerated. GDP contracted by nearly 8.8 percent in 2006 and by 4.2 percent in the first quarter of 2007. In 2007 the growth rate was near zero and in it is projected to be only one percent in 2008.

In spite of the difficult environment, the Palestinians have managed to establish a financial sector composed of most of the expected sub-sectors: banks, a securities market, insurance companies, payments system, housing finance companies, microfinance institutions and financial leasing companies. Yet, important needs for financial services have not been met (for micro-credit, households, and SMEs).

The Palestinian Authority (PA) has established two main institutions to regulate and supervise the financial sector: the Palestinian Monetary Authority for the banking sector (as well as payments system, micro finance institutions and money changers), and the Capital Market Authority for the non-banking sector (securities market, financial leasing, mortgage finance companies, pension funds, and insurance companies). The development of those subsectors, as well as the regulatory bodies, is uneven and the PA’s monetary powers and sovereignty remains limited since it has no national currency, which therefore narrows the scope for influencing monetary and economic conditions.

Assuming that the potential of the West Bank and Gaza economy is unleashed, which would require a major dismantling of today’s closure regime, the financial sector, as it appears now, would be ready to play an active role. That said, the PA should continue to refine and strengthen this sector to improve its functioning under the current constraints. Those efforts would also fully benefit the West Bank and Gaza economy if and when the political situation eases. In the meanwhile, the PMA should pursue its goal of becoming a full-fledged central bank, while the CMA would benefit from capacity building support so they can play a more effective role as regulator of the various sub-sectors for which it is responsible.

Banking Sector

As in most developing countries, the banking sector dominates the financial sector. Banks are generally in sound financial condition and products are well developed as is the regulatory infrastructure. However, the sector remains vulnerable due to its dependence on the Jordanian banking system and, from an operational point of view, on the Israeli one. Due to a large extent to the current political instability and to the depressed economic activity, banks play a very limited role in the financing of the WBG economy. The cautiousness of the banks reflects various structural problems such as the lack of suitable collateral and the uncertainty of the outcome in debt collection. Important steps have been taken by the PMA to develop the banking system and improve its stability (credit bureau, payments system, capital requirements and regulations on secured credit). Additionally, two bank loan guarantee programs to largely substitute for the lack of acceptable collateral for small and medium enterprises (SMEs) were successfully launched. Despite the current economic situation, those programs should continue to expand.

While the current efforts of the PMA to develop the sector should continue including enactment of a new banking law to provide better basis for implementation of all of the Basel Core Principles, extending the network of the credit bureau, and completing the installation of the payments system, the PA should also consider strengthening the financial infrastructure by promoting out-of-court settlement for debt collection and establishing a national registry for pledges of movable property to increase the array of collateral likely to be accepted by banks to secure credit facilities.

Payments System

The payments system has a number of weaknesses and vulnerabilities which are magnified by the multi-currency status of WBG as well as the movement and access restrictions resulting from the closure regime. While some banks have electronic payment instruments for their customers, WBG remains mainly a paper-based financial transaction economy with cash being the dominant payment medium for the general public. Aware of the weaknesses and the importance of an effective and comprehensive payments system for the development of the WBG economy, the PMA, with the assistance of the World Bank, has embarked on a modernization program. Systemic risk will also be reduced by the planned introduction of liquidity management functions.

With regard to non-banking sector, insurance and microfinance are fairly well developed while financial leasing and housing finance have emerged only recently, private pension funds have yet to be established and the regulation and supervision of this sector began only 2 ½ years ago.

Securities Market

The capital market, which consists of underwriting of share issues and trading of shares on the Palestinian Stock Exchange (PSE), began 10 years ago. The activity is regulated by the CMA and the PSE, according to an allocation of responsibilities which should be clarified. Given the predominance of SMEs and family-owned enterprises in the WBG economy, there are only 35 listed companies thus far and the potential for new applicants appears limited. The PSE is thinly traded and the index is relatively high and very volatile, which could potentially amplify economic shocks. This situation reflects the fact that rumors rather than economic fundamentals move prices and also that numerous individual investors with limited financial knowledge buy shares directly on the stock exchange.

Given the current situation, the CMA may want to consider various measures to develop the market such as the establishment of professionally managed investment funds for investment in securities, the definition of its respective regulatory and supervisory roles vis-à-vis the PSE and the development of a bond market. Also, the PA may wish to consider amending the Law of the CMA to give it more political independence.

Insurance

With 2.5 percent of the financial sector’s assets, insurance companies do not play the role as those in other countries as important institutional investors. The contribution of insurance premia to GDP was only 1.6 percent in 2006 while the spending on insurance per capita was about USD 18 compared to the average of 2.7 percent and USD 60 in developing countries. This situation mainly reflects depressed economic activity, transit restrictions and limited public awareness of insurance products.

The insurance industry was not supervised for ten years until 2005 and remedial supervisory measures are underway by the CMA. Insurance products are varied but overall income has declined due to the marked reduction in underwriting of compulsory motor vehicle insurance. The legal and regulatory infrastructure for insurance is based on international practices and the Council of Ministers and CMA have issued prudential and market conduct regulations. Market development depends mostly on an increase in economic activity though some new products were recently introduced that are promising. The CMA should endeavor to strengthen companies’ operations to enable them to qualify for high international ratings and for reinsurance of a major portion of their liabilities by highly rated reinsurance companies.

Financial Leasing

Financial leasing is in its infancy. There are four active companies leasing mainly motor vehicles for commercial fleets. Some basic regulations have been issued by the CMA and a leasing law is under development. That law may stimulate more interest in the activity. The CMA should issue market conduct regulations and the companies should develop a consumer education campaign to promote financial leasing of commercial and industrial equipment in addition to automobiles.

Housing Finance

Housing needs are great in WBG, but price levels and spatial restrictions, partly due to the on-going Israeli settlement activity in the West Bank and the existence of restricted roads and areas, constrain the effective demand while products available for finance housing demand are too limited. The Palestinian Mortgage and Housing Corporation (PMHC) that provides refinance and mortgage guaranties had a catalytic effect in the emergence of mortgage lending but has lost its attractiveness for primary lenders. The Palestinian Investment Fund (PIF) is working on late stage plans to help address housing and mortgage finance needs by developing a large-scale, affordable housing project and is in advanced negotiations to establish a mortgage finance company.

To further develop the market, the PA should improve the legal and regulatory environment (strengthening and modernization of the mortgage lending framework, development of a framework for the financing of housing development, and alignment of CMA and PMA regulations in respect of mortgage lending and housing finance) and take steps to foster market development and facilitate access to housing by moderate income groups an conjunction with the PIF initiative. This should include, inter alia, the reform of the PMHC to improve its services to the market and the building of lender’s capacities. The adoption by the CMA of appropriate prudential and market conduct regulations will also be key element for the emergence of a sound housing finance sector.

Microfinance

Microfinance is well developed in its offering of products that are essentially only credit but apparent needs far exceed the funding capacity at present. Funding is by donors and reinvested profits. MFIs are not currently sustainable.

Operations infrastructure of the nine nonbank providers is being strengthened and a regulatory framework is being developed by PMA that should require MFIs to be organized as companies with effective corporate governance structures and procedures and contain rules for market conduct. If MFIs were permitted to take deposits from the public or convert to banks with moderate regulatory requirements, as acknowledged by the Basel Committee on Banking Supervision, it would enable MFIs to become sustainable. Moreover, profitable and expanding MFIs should result in those institutions providing access to finance for the middle market (households and SMEs), thereby creating a financing continuum in the customer spectrum.

Pension Funds

There are no privately managed pension products in WBG and the domestic financial sector currently lacks entities other than insurance companies which could offer or manage pension products. There are too few regulations in place for the provision of either pension products or the underlying products and services. The CMA would need technical assistance to train its personnel, develop the necessary regulatory framework, and establish bilateral supervisory agreements with regulators in other countries.

Legal Framework

The general legal framework supporting the financial sector should be considerably modernized and its enforcement made more efficient. The company laws applicable in WBG do not reflect the revolution in corporate governance in recent years. A corporate governance code is being developed but is reported to be only voluntary. For creditors’ rights there should be modern rules for creation, registration and enforcement of pledges of moveable property. Some debt collection procedures are efficient but regular court proceedings are protracted and outcomes would benefit from modern case management and training of judges in commercial and financial matters.

Recommendations for Reforms

The recommendations for reforms in this report are summarized in Section IX. Those and the actions undertaken and planned by the PMA and the CMA would provide an adequate financial sector structure and infrastructure to support expanded economic activity. In that respect, these actions would support the Palestinian Reconstruction and Development Plan which recognizes the importance of private sector development to meet its goals.

Additionally, a comprehensive Financial Sector Development Plan could be considered, including monetary policy management issues (limitation of number of currencies, establishment of a money market, issuance of PA bonds). In any event, since there is no entity in WBG with responsibility for reform of the overall financial sector, the establishment of a steering committee composed of the main financial sector stakeholders, would seem to be appropriate to coordinate technical cooperation and to keep reform efforts on track.

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EXECUTIVE SUMMARY

The course of the Palestinian economy since the Second Intifadah has left per capita GDP in 2006 ($1,130) at 40% less than in 1999, and has altered an already-fragile economy from one driven by investment and private sector productivity, to one sustained by government and private consumption, and donor aid.

Reversing this downward cycle requires parallel actions by the Palestinian Authority (PA), Israel and the donors. Reform and development of the Palestinian economy and its institutions must proceed immediately. To succeed, these reforms must be implemented with determination by the PA, underwritten by donors and supported by Israeli actions. In the same vein, Israeli policies that impact the Palestinian economy and Palestinian actions on security to reinforce these policies must proceed in parallel.

The PA’s Palestinian Reform and Development Plan (PRDP) for 2008-10 represents a process around which the PA, Israel and the donor community can coalesce. The PRDP is an important document that envisions a sequence of steps centering on control of expenditures with medium-term reforms across sectors to bring the PA back to financial sustainability. In addition, the PRDP is a promising effort by the PA to link policy-making, planning and budgeting, and to deliver a Palestinian-owned plan for allocating resources.

The PRDP is regarded as succeeding insofar as it is addressing the entirety of the Palestinian population. The Gaza Strip represents about 40% of the population, and an essential part of the Palestinian territory and economy. Any effort at economic recovery and development must address the impacts of the current closure regime and the aftermath of the illegal takeover of Gaza. The continued entry of humanitarian goods has mitigated the impact of the closures on Gaza’s population, but has not been sufficient to offset the collapse of the private sector there.

The Expenditure Control Policy of the PRDP

The PRDP, with a gap for recurrent and capital expenditures of around $1.8 billion in 2008, seeks to stabilize the PA’s fiscal situation through donor budgetary assistance, while containing recurrent spending and, as the economy improves, shifting resources progressively towards development spending. This expenditure control policy would extend to the largest spending categories, including the public sector wage bill and net lending.

Wages for civil service and security personnel account for almost half of total government expenditures and have increased by nearly 57% since 2004. New policies will reduce the wage bill from 27% of GDP in 2007 to 22% of GDP by 2010. This is a considerable effort in light of the need to compensate for the scarcity of private sector jobs, but is still insufficient to bring the civil service in line with actual requirements. Within the public sector, the security services represent approximately 44% of the wage bill. Reform of the security sector is linked to a political framework that includes the rebuilding of institutions, support to disarmament, demobilization and reintegration, and measures to improve the rule of law. Regardless of the ultimate structure of the security services, some early steps can be taken, including an accounting of their numbers, the removal of “non-compliant” officers, and exploring options for officers nearing or past retirement age. Outside of the security sector, health and education represent other areas of reform over the three year period. These sectors have seen significant accomplishments over the years, but there remains a scope for efficiency gains and cost savings.

Any practical discussion on expenditure control and reform must be supported by a viable pension system. Taking this into the account, the PA has included pension reform in the PRDP, with a planned institutional review of current pension schemes in 2008. Some early steps can be taken, including addressing the unregulated private sector pension system. Also, the PA is exploring a policy of a ‘flat rate coverage system’ to cover the poorest in the WB&G. This can be explored, with a costing of different options in comparison with the likely savings from a revised pension system. These steps, along with an adequate focus on safety nets, can facilitate any necessary steps the PA would take to recalibrate the pension system to one that is consistent with the PRDP’s expenditure control policy.

Another key fiscal reform is the reduction in net lending, which is the second largest expenditure after the wage bill. The PA has already initiated critical steps in this regard. Moving forward, these initiatives are of greatest impact if accompanied by other reforms over time, including: (a) creating electricity suppliers that are financially sustainable and able to collect payments from customers; (b) transferring electricity supply from municipalities to electricity distribution companies, complemented with a system to fix municipal finances; and (c) introducing a well-targeted social protection system to ensure access to electricity for the poorest segments of the population.

The Development Investment Agenda

The PRDP also presents a coherent development plan that reflects a frank assessment of the PA’s absorptive capacity for project implementation. The development agenda contains priority investments in governance, social, economic and private sector, and infrastructure development worth $1.644 billion over three years. The development budget increases progressively over this three year period (from $427 million in 2008 to $667 million in 2010), reflecting pragmatic assumptions by the PA of its own absorptive capacity.

As the PRDP is a rolling process, additional analysis will be needed to ensure that the development projects are properly costed and sequenced. Moreover, the economic development projects are vital for creating an environment for investment and trade. Once these priorities are clearly set, it will be necessary to determine the mandates and resource needs- including for capacity building- of relevant institutions such as the Land Authority, Customs, General Administration of Crossings and Borders, etc. Programs aimed at increasing production and exports will need to be designed carefully to ensure access of goods and to account for the impacts of movement and access restrictions.

Implementing the PRDP

The realization of the PRDP relies on parallel commitments by the PA, Israel and donors, but also on a proper design of the implementation mechanisms. In terms of channels of assistance, the PA has expressed the need for donor aid to cover the entirety of the PRDP, with primary focus on recurrent expenditures to ensure the PA’s viability. Also expressed was the need for direct assistance into the MOF’s Single Treasury Account (STA), given the priority for financing recurrent expenditures and the PA’s successful efforts to reconstitute key parts of the public financial management system. In addition to these, other aspects of implementation must be addressed, including: (a) monitoring and evaluation of the PRDP that is clear, practical and that encompasses all of the Palestinian Territories; (b) identifying innovative ways, reflective of the PRDP’s commitments, to ensure that Gaza is not confined to humanitarian assistance alone; and (c) exploring, over time, ways of improving the existing intergovernmental fiscal relations.

Scenarios Facing the Palestinian Economy

The PA’s macroeconomic framework assumes: (a) the successful advancement of reforms, including law and order; (b) sufficient donor funding; and (c) a gradual easing of movement and access restrictions subject to Israeli security concerns. It does not assume a resolution of the situation in Gaza. Therefore most of the growth would be in the West Bank, driven by Government investment and consumption, both of which are linked to aid. Successfully reaching the PRDP goals will lead to modest growth, averaging 5% per year, which– given current demographics and distribution of income- will barely affect poverty levels.

An economic scenario analysis shows that the successful implementation of Palestinian commitments alone, with partial donor funding and continued movement and trade restrictions, will fall well short of the intended targets. Achieving 5% growth rates will depend critically on the commitment of the international community to fill the total fiscal gap over the next three years, as well as on the revival in the private sector as a result of concrete steps by Israel on settlement growth, and movement and access restrictions. Even with full funding but no relaxation in the closure regime, growth will be slightly negative, at around -2% per year. If the required aid also fails to materialize, income will decline even more, and the already high and growing poverty levels will rise dramatically.

Alternatively, a scenario where the PRDP is implemented and fully funded by donors and where private sector activity and trade is revived will accelerate growth considerably. Embedded in this scenario is a recovery in Gaza driven by the resolution of the current stalemate, and the removal of movement and trade restrictions affecting both the West Bank and Gaza.

Under every foreseeable scenario, the short-term viability of the Palestinian economy will be driven by aid. Even under the most optimistic scenarios significant aid will continue to be required for the medium-term. Clearly, the ability of the private sector to resume its place as a driver for growth will have a major bearing on the sustained health of the Palestinian economy and thus its aid requirements, which will therefore be even larger in the absence of improvements in movements and access restrictions.

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