Salam Fayyad - Palestinian Finance Minister (Again)

16 April 2007

Dr Salam Fayyad has been traveling the diplomatic capitals of the world, having recently been appointed, for a second time, to the position of the Palestinian Minister of Finance.

He has a distinguished record in international banking. In his mid 50s, he has already served as an economist at the World Bank in Washington, D.C and represented the IMF in Jerusalem from 1995 to 2000. There, he specialised in financial reform of the Palestinian Authority's (PA) Ministry of Finance.

He later was in charge of the Arab Bank for the West Bank region, before going on to accept the position of PA Minister of Finance in November 2003. As the Financial Times declared:

(He) was lauded by the international donor community for bringing transparency and improved governance to a fiscal system previously marred by corruption. Under his tenure, hundreds of millions of dollars in aid were transferred annually to the PA via a single account that he controlled. That system broke down when the international community decided to boycott the Hamas-led PA and transfer aid through the office of President Mahmoud Abbas.

(The question begs what happened to the funds in the account, when Hamas took over the Finance Ministry in 2006 and it ceased to publish monthly reports on the internet.)

In early 2006, Fayyad entered the Palestinian Parliament through the Third Way Party. His group claimed to have compiled 16 reports on senior members of the Palestinian oligarchy, including those in the security services, whom they believe to have been swathed in pecuniary corruption.

Fayyad is known for his good relations with both President George Bush and Secretary of State Condoleezza Rice. He also maintains close contact with many Israeli personalities with access to the Prime Minister's Office. And, yet...

And yet, the Palestinians are unlikely to receive the funds they request in the near future. There are 3 reasons for this response. The problem is not that Israel is officially boycotting all Palestinian government ministers, Hamas or otherwise.

First, politicians are concerned that Fayyad is continuing to renege on previous promises, originally delivered but not kept by Abbas and Hamas finance officials. When Israel delivered monies in January 2007, there was an understanding that they would not end up paying for the salaries of militants. The Palestinians have failed to prove to the world that this policy has been implemented.

Second, Benita Ferrero-Waldner, the EU External Affairs Commissioner, confirmed after recently meeting Fayyad that despite the needs of the Palestinians, the new Palestinian government had yet to renounce violence. That is unacceptable to the Europeans and the rest of the Quartet.

Third, a recent report from the World Bank has warned of a new financial crisis facing the Palestinian Authority. As the document explained, much of the problem is self-inflicted; a public sector payroll growing at 9% annually, burdened by unjustified pay rises and new, non-functioning offices in the security sector. It has not gone unnoticed that this trend gained momentum during Fayyad's previous stint at the helm of the Finance Ministry.

Fayyad's challenge is enormous. It will be interesting to see if he can recoup the fortunes squandered by his Hamas predecessors.

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