## IMF Staff Concludes Visit to West Bank and Gaza

_IMF News, February 13, 2017_

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## Bibliographic details
- Published: February 13, 2017

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### Mission summary
- IMF mission led by Karen Ongley visited East Jerusalem and Ramallah from January 31 to February 9, 2017.
- Press Release No. 17/46, dated February 13, 2017.
- Mission met with Prime Minister Rami Hamdallah, Finance Minister Shukry Bishara, Governor Azzam Shawwa, and other Palestinian officials.
- Statement reflects views of IMF staff and does not necessarily represent the views of the IMF’s Executive Board; the mission will not result in a Board discussion.

### Recent economic developments and outlook
- GDP growth estimated to have increased from 3.5 percent in 2015 to 4 percent in 2016.
- Unemployment rose to more than 28 percent in September.
- Consumption remains the primary driver of growth; political uncertainties and access restrictions inhibit private sector investment across the West Bank.
- Donor-funded reconstruction in Gaza continued, but aid disbursements were delayed and humanitarian conditions remain dire as provision of public services worsens.
- Growth projected to hover at little more than 3 percent in the medium term.
- Outlook risks: possible lower donor support and slower than desirable reconstruction of Gaza.

### Fiscal outcomes and projections
- Strong revenue mobilization efforts contributed to a marked reduction in the 2016 fiscal deficit.
- Discussions between the PA and Government of Israel contributed to the payment of past obligations to the PA; these one-off factors helped to increase tax and non-tax receipts by about 2 percentage points of GDP.
- The sharp increase in total revenue saw the recurrent deficit decline to 5.6 percent of GDP in 2016 from 9.6 percent of GDP in 2015.
- A further decline in donor budget support contributed to a financing shortfall and the accumulation of arrears.
- The 2017 budget prudently assumes lower donor support and no additional one-off transfers from Israel.
- The recurrent deficit is projected to widen by about 2 percent of GDP.
- With another 15 percent decline in donor budget support, this would result in a financing gap of almost 6 percent of GDP.

### Fiscal and structural policy recommendations
- Build on recent revenue mobilization efforts and explore mitigating options given medium-term fiscal strains.
- Near-term contingency measures could include limiting the increase in the wage bill to inflation (the wage bill is the largest expenditure item).
- Finalize and implement the new Public Financial Management (PFM) strategy to enhance spending efficiency and promote lasting fiscal improvements.
- Develop an action plan of well-prioritized PFM measures to provide a strong basis for increased donor engagement and support for the government’s priorities in the context of the 2017-2022 National Policy Agenda.
- Prioritize civil service and pension reform; adopting a strategic approach to the wage bill would free up resources for priority public investments.
- Reverse the decline in donor support and continue discussions with the Government of Israel on enhancing and improving the predictability of revenue transfers.
- Timely finalization of the recent electricity sector agreement on a transparent and equitable basis is important, paying close attention to the budgetary implications of successfully implementing the agremeent.

### Financial sector stability and AML/CFT
- Efforts to maintain financial stability are important to ensure the financial sector can support sustained economic progress.
- A key risk is the possible withdrawal of Israeli correspondent banking relationships.
- The Palestine Monetary Authority (PMA) remains committed to strengthening the anti-money laundering and combating the financing of terrorism (AML/CFT) framework, in line with international standards.
- PMA has a constructive working relationship with the Bank of Israel.
- PMA recently accepted a request for a comprehensive AML/CFT evaluation by MENAFATF and plans to continue AML/CFT-related reforms, with technical support from the IMF and other development partners.

*IMF Communications Department — Press Release No. 17/46, February 13, 2017.*

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## References

- [Israel and the IMF](http://www.imf.org/external/country/ISR/index.htm)
- [West Bank and Gaza and the IMF](http://www.imf.org/external/country/wbg/rr/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [http://www.imf.org/wbg](http://www.imf.org/wbg)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2017/02/13/pr1746-imf-staff-concludes-visit-to-west-bank-and-gaza_