World Bank Hides Cause of Palestinian Financial Crisis: Terror Salaries

In a recent report on the Palestinians’ bleak financial outlook, the World Bank never once referred to a PA policy that diverts millions to pay salaries to murderers and other criminals.

By Palestinian Media Watch

In a press release accompanying a new World Bank report assessing the Palestinian Authority (PA) economy, Kanthan Shankar, the World Bank’s Country Director for Palestinian-controlled areas, said that the PA is having financial difficulties due to a “liquidity squeeze.”

According to the World Bank, “The outlook for the Palestinian territories is worrisome as drivers of growth are diminishing and the severe liquidity squeeze has started to affect the PA’s ability to fulfill its responsibilities of paying its civil servants and providing public services.”

This ostensibly bleak prognosis, issued in September 2019, was based on a 15-page report that pointed to two major factors that contributed to the PA’s financial crisis, but completely ignored the elephant in the room: That the PA’s financial crisis is a direct result of its “Pay-for-Slay” policy which has the PA squander millions of dollars a year to pay monthly salaries to terrorist prisoners and released prisoners as well as monthly allowances to wounded terrorists and the families of dead terrorists!

According to the World Bank report, the two dominant factors underlying the PA’s latest financial crisis are Israel’s “unilateral deductions of almost US$12 million per month from the tax revenues it collects on behalf of the PA” and a reduction in foreign aid.

Providing no context for the Israeli deductions, in what can at best be seen as an act of willful blindness and at worst a deliberate attempt to mislead the international community, the World Bank report never once referred directly to Israel’s Anti-“Pay-for-Slay” law, according to which Israel withholds PA taxes equaling the amount the PA rewards terrorists, and never bothered to note that it was legislated as a direct response to the PA’s “Pay-for-Slay” policy.

The report did not explain, for example, that the PA budgeted hundreds of millions of shekels, in 2018 alone, to reward the wounded terrorists and the families of dead terrorists, and that the PA admitted to paying 502 million shekels in salaries to terrorist prisoners and released prisoners.

Having noted the deduction and the fact that the PA then refused to accept the remaining tax funds – which Israel has already passed on to the PA, and which the PA refused to accept – much of the rest of the World Bank report is dedicated to explaining how the PA has dealt with the consequences of its own decision. Here too, however, the report goes to great lengths to explain the depth and effects of the crisis, but never notes that the entire crisis is self-made for a number of reasons.

First, were the PA to abandon its “Pay-for-Slay” policy Israel would no longer need to implement its Anti-“Pay-for-Slay” law and make deductions from the tax revenues.

Second, the deductions made by Israel account for only 6% of tax revenues. Israel has transferred the remaining 94% to the PA, but the PA rejected the funds.

Third, while the PA decided to cut the salaries of its public employees as a result of the financial crisis it has driven itself into, that decision did not apply to the PA’s “Pay-for-Slay” recipients – the terrorists. As opposed to the law abiding PA employees whose salaries were cut, the monthly salaries the PA pays to the terrorist prisoners and released prisoners or to the monthly allowances paid to the wounded terrorists and the families of the dead terrorists remained unchanged.

Innocent Victim?

The cumulative distorted impression deliberately given by the World Bank report, is that Israel simply acted arbitrarily and without cause to deduct funds from the PA, and that the PA is merely an innocent victim of these arbitrary actions.

Compounding its willful blindness (at best) or its deliberate attempt to mislead the international community (at worst) the report adds that an additional cause of the financial crisis is the decline in foreign aid. Here too, the report ignores the elephant in the room.

In 2018, the American Taylor Force Act conditioned hundreds of millions of dollars of US direct aid to the PA on the abolition of the PA’s “Pay-for-Slay” policy.

Instead of accepting that the continued implementation of the policy of rewarding terrorists would result in the loss of all aid from the PA’s most generous donor, the PA rejected the US condition.

Having already lost the aid, PA Chairman Mahmoud Abbas declared on television in 2018, “Even if we have only a penny left it will only be spent on the families of the Martyrs and the prisoners, and only afterwards will it be spent on the rest of the people.”

Abbas has since reiterated this numerous times. Giving outright precedence to its “Pay-for-Slay” policy over any US aid, in December 2018, then PA Prime Minister, Rami Hamdallah, waived all the remaining US aid that was not conditional upon the PA abolishing its policy.

Other countries that cut aid to the PA as a result of its policy of rewarding terrorists included Australia and Holland, with Sweden and Norway making similar decisions.

Incredibly, similar to its omission of any context regarding Israel’s “deduction,” the World Bank report fails to note that the decline in foreign aid is also a direct product of the PA’s “Pay-for-Slay” policy.

As if these critical contextual omissions were insufficient, the World Bank report ends with the recommendation: “The PA should work closely with development partners to identify additional external aid as without it, a fiscal and economic crisis cannot be avoided in the absence of clearance revenues in 2020.”

In other words, instead of clearly identifying the PA’s “Pay-for-Slay” policy as the main obstacle and root of its financial crisis and recommending that the PA immediately abolish this policy, shamefully the World Bank’s recommendation is that the international community continue to fund both the PA and its noxious policy.

Distorted reports such as these, from ostensibly neutral and professional international bodies, entrench the bias against Israel and embolden the PA’s victimhood narrative. Such reports do nothing to hold the PA accountable for its own decisions and nothing to promote either peace or fiscal stability for the PA and the Palestinians.

Israel’s Anti-“Pay for Slay” law was passed in July 2018. The law instructs the state to deduct and freeze the amount of money the PA pays in salaries to imprisoned terrorists and families of “Martyrs” in one year from the tax money Israel collects and transfers to the PA in the following year.

Should the PA stop these payments for a full year, the Israeli government would have the option of giving all or part of the frozen money to the PA. The law was first implemented in February 2019, shortly after a Palestinian brutally raped and murdered Israeli teen Ori Ansbacher, when Israel’s Security Cabinet decided to withhold 502,697,000 Israeli shekels (approximately $138 million) from the PA to be deducted in 12 monthly parts.