According to a new World Bank report, the Palestinian economy is expected to continue to operate well below its potential, and the growth rate is expected to reach about 3%. In light of population growth trends, the growth of per capita income is expected to stop, which will negatively affect Living standards. In addition, a range of financial obstacles and restrictions imposed by Israel impede access to healthcare services, negatively affecting the population, especially in the Gaza Strip.

The Palestinian Economic Monitoring Report entitled “A Race Against Time” will be presented to the Special Liaison Committee, a policy meeting on the coordination of development assistance to the Palestinian people, in New York on 20 September 2023.

The report highlights the economic challenges facing the Palestinian territories, and also describes the obstacles affecting health services.

In this regard, Stefan Emblad, Director and Resident Representative of the World Bank in the West Bank and Gaza Strip, says, “The Palestinian economy has been suffering essentially from stagnation over the past five years, and it is not expected to improve unless policies on the ground change, and the Palestinian territories have participated in a union.” De facto customs duties with Israel have been in place for thirty years, but contrary to what was expected when the relevant agreements were signed, the disparity between economists has continued to widen, as the level of per capita income in Israel has become 14-15 times greater than the per capita income in the Palestinian territories. Poverty rates are very high, and approximately out of every 4 Palestinians, one Palestinian lives below the poverty line.”

“Our report reminds all parties of the urgent need to work to stimulate per capita growth and consolidate public finances,” Emblad added.

The Palestinian economy still faces high risks, in light of a complex system, due to Israeli restrictions on movement and trade in the West Bank, a quasi-siege of the Gaza Strip, an internal division between the West Bank and Gaza, severe restrictions on public finances, an incomplete reform program for the Palestinian Authority, and a decline in Foreign aid over many years.

During the year, public revenues increased significantly; However, expenses also continued to increase, mainly because of the rising wage bill for public sector workers.

Taking into account the partial implementation of recent agreements between the government and labor unions, and Israeli deductions from revenues collected on behalf of the Palestinian Authority (known as “clearance revenues”) amounting to approximately $256 million, as well as donor contributions, the deficit is expected to reach $493 million. $ in 2023, or 2.5% of GDP. If agreements with practical unions are fully implemented, the deficit will increase, reaching 2.7% of GDP.

The main concern in this context is that financing options are becoming increasingly limited, and the deficit is expected to continue to be financed through arrears owed to private sector suppliers, the Public Pension Fund, and public employees (who already receive only 80-85% of their wages Since late 2021).

The continued accumulation of additional arrears - in the long term - affects market liquidity and can ultimately stifle economic activity, with devastating effects on poverty levels and social stability.

Reform efforts by the Palestinian Authority are necessary, but not sufficient, to achieve the much-needed growth and sustainability of public finances. It is also important to obtain more financial support from donors, in addition to the need for increased cooperation on the part of the Israeli government, and this cooperation includes transferring collected revenues. From Israeli companies operating in Area C to the Palestinian Authority, transferring the value-added tax on trade between Israel and Gaza to the Palestinian Authority, fully implementing the electronic clearing system for value-added tax by adopting legislation to implement this system, and increasing transparency in clearing revenue deductions.

Emblad added, “The constraints on public finances are weighing heavily on the Palestinian health system, especially on its ability to deal with the increasing burden of non-communicable diseases, and many of the obstacles that prevent the provision of health care have made the system of external medical referrals for treatment in non-Palestinian hospitals practical.” complex, negatively affected by restrictions on the movement of Palestinian patients, and a time-consuming bureaucratic permit system, which often makes it very difficult to provide adequate or life-saving health care in a timely manner.”

Significant financial and administrative constraints restrict the system of timely external medical referrals for the treatment of cancers, heart diseases, and maternal and child health conditions, for which treatment is not available in public hospitals in the West Bank and Gaza.

The Israeli occupation, the fragmentation of the Palestinian territories, and the broader macroeconomic and fiscal context as defined above have had a significant impact on the ability of the Palestinian health care system to provide these services in public hospitals.

The situation is considered very critical in Gaza, which suffers from an increasingly limited capacity of the health system, especially the struggle of patients to obtain the necessary medical exit permits on time, and the procedures for external medical referrals pass through a complex system, in terms of the flow of patient numbers and financial flows.

About 42,000 applications for permits are submitted each year by patients alone (ie, excluding companions), and the vast majority of patients require permits from Israel to obtain an external medical referral service.

The approval rate for these authorizations varies from year to year, and the same patient may be refused, delayed or accepted at different stages of the continuum of care, demonstrating the somewhat arbitrary nature of the evaluation process.

Figures taken from research show that the quasi-siege imposed on Gaza had a negative impact on the mortality rate, as some patients died before completing the procedures for obtaining permits.

Due to the high prices charged by private hospitals and hospitals affiliated with civil society associations, the external medical referral system accounts for a large share of the expenses of the Palestinian Ministry of Health, resulting in increased spending rates that are not sustainable, and this has an additional impact on public finances that are already under pressure.

The cost of this system is unlikely to be reduced in the near future, given the difficulty the Palestinian Authority faces in increasing available fiscal space and investing in building the capacity of public hospitals.

In addition, for referrals to Israeli hospitals, the Ministry of Health does not control prices, and costs are deducted from clearing revenues owed to the Palestinian Authority, not to mention limited transparency and reporting at the case or patient level.

This report emphasizes the importance of strengthening coordination between the Israeli and Palestinian authorities, with the aim of improving the management of these cases, especially facilitating and accelerating the pace of procedures for obtaining permits, to improve service for patients and companions in a timely manner, facilitating the entry of medical equipment, especially into the Gaza Strip, and increasing price transparency.