The Hamas Government's First Fiscal Budget - The Implications

February 5, 2007

The World Bank has consistently insisted that two conditions must be met if the Palestinian economy is ever to recover its ability to support a viable state; fiscal control, aided by a reduction in the ever-increasing numbers in the civil service.

The Hamas has just announced its plans for the 2007 budget. The declared intention is to raise yet again the level of personnel on the public payroll. Specifically, 25,000 extras are to be added to the burgeoning "security personnel" payroll.

As reported in the International Herald tribune, Hamas expects the source of much of the extra funding to come from Western taxpayer contributions. In other words, by contributing to the World Bank's Temporary International Mechanism and other mechanisms, Europeans and others free up other "income" to fund the violence.

The following is a report on the Hamas budget plans, from the International Herald Tribune.

Hamas-led government drafts highest annual budget despite aid boycott

The Associated Press

Published: January 18, 2007

GAZA CITY, Gaza Strip: Despite an international aid boycott, the Hamas-led government is projecting the largest-ever budget for 2007, the acting finance minister said Thursday, reflecting the growing public payroll.

The official, Samir Abu Aisheh, said the budget would amount to $2.56 billion (1.98 billion), an increase of about $500 million (386 million) from 2006, counting on international aid to keep the deficit to 40 or 50 percent.

Israel, the U.S. and European Union cut off funding after Hamas took office in March 2006, charging that the Islamic group is a terrorist organization. Instead, aid has been funneled through the office of moderate President Mahmoud Abbas or directed to specific projects.

"We think the countries that are offering indirect assistance, which doesn't go through the government, will continue to do so, with reasonable amounts like in 2006," he said. He also hoped for an end to the aid boycott, which has caused widespread hardships in the West Bank and Gaza.

However, Hamas has rejected international demands - recognizing Israel, renouncing violence and accepting past peace accords. Moderate Palestinian President Mahmoud Abbas was to meet in Damascus on Saturday with the top leader of Hamas, Khaled Mashaal, to try to forge a unity government that would satisfy all sides.

On Thursday Israel said it would transfer $100 million (77 million) in tax money it collects for the Palestinians, the first such payment since Hamas took office in March.

Abu Aisheh said 25,000 workers have been added to public sector payroll, making the budget increase necessary.

Economist Samir Hleileh, who served as Palestinian Cabinet secretary before Hamas came to power, said the budget projection is based on unrealistic expectations.

"It is based on assumptions that are not valid, that the donors are ready to commit and that a national unity government will be accepted internationally," he said.

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