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Lebanonwire, September 22, 2003

The Daily Star

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G7 agrees to review prospects of increased financial aid for Palestinians  

The Palestinian finance minister won a promise of additional financial assistance at a meeting Saturday with the Group of Seven major industrialized nations as a World Bank official urged donors to help the troubled Palestinian economy.
A statement issued by the G7 after ministers met in Dubai with Palestinian Finance Minister Salam Fayyad prior to the annual conference of the World Bank and the International Monetary Fund (IMF) said the ministers agreed to “review prospects for increased financial assistance in the short term.”
“We will advocate that the World Bank replenish the Trust Fund for the West Bank and Gaza this fall,” said the statement, urging other members of the international community to increase and accelerate assistance to the Palestinian Authority (PA).
No figure of assistance was given, but an IMF official said Saturday the Palestinians would need “in the neighborhood” of $1.2 billion.
Karim Nashashibi, the IMF resident representative in the Palestinian territories, said $200 million of that money will be in direct support for the PA budget for the rest of the year and the remainder for rehabilitation and reconstruction of infrastructure.
Fayyad expressed optimism the Palestinians would secure the requested funds at a meeting of donors slated for November at an as yet undetermined venue.
US Treasury Secretary John Snow said “the US will continue to provide budgetary support and other aid to the Authority to help insure that it can effectively conduct normal government functions.”
His statement, released after the meeting, was significant in view of the tension between Palestinian President Yasser Arafat and the United States.
The pledge came as an audit of the PA disclosed that Arafat had diverted $900 million in public funds to a special bank account he controled and most of the money was later invested in Palestinian assets.
Nashashibi credited openness and transparency in the PA’s accounting under Fayyad for disclosing the transfers between 1995 and 2000.
The large majority of the money was invested in Palestinian assets at home and abroad, Nashashibi said. A Palestinian Investment Fund was established to manage those assets and privatize them, he added.
The IMF official did not rule out the possibility of the remaining funds being misused, saying he believes an audit of the remaining funds will be conducted later.
“In any system you can always have a possibility of misuse of funds,” Nashashibi said. “But what we’re trying to do is have a level of disclosure and transparency so that future or present misuse does not happen … at least there is a follow-up, there is disclosure.”
Nashashibi said the revenues were diverted from the budget to a special account controlled by Arafat and his chief economic adviser.
“We estimated that amount to be around $900 million over a period of five years,” the IMF official said.
He said the PA was involved in 69 commercial activities, at home and abroad, worth an estimated $700 million in today’s market prices, “which probably in 1999 were $900 million.”
Nashashibi said Fayyad, who was the resident representative of the IMF in the Palestinian territories in 2000, told Arafat the account must be disclosed.
Fayyad’s efforts to weed out corruption were praised by the G7 statement, which said reforms raise confidence of both the donors and the Palestinian people.
The IMF said Saturday the Palestinian economy has contracted by about a third since the outbreak of violence but there were signs of recovery in mid-2003.
The IMF said Israeli checkpoints and closure of Palestinian towns contributed to the decline but the economy has been more resilient than might have been expected, a result of solidarity among the Palestinians, according to Nashashibi.
Nashashibi said peace would benefit both the Palestinian and Israeli economies, noting that Fayyad told the G7 meeting the Palestinians will not need any budgetary support “as soon as we go back to normal mode.”
The Palestinian economy is worth $5 billion and Israel’s is $110 billion – “a huge market next door” that was extremely important to the Palestinians, Nashashibi said.
World Bank director for the Palestinian territories, Nigel Roberts, warned Saturday the Palestinian economic situation was “both tragic and dangerous.” – Agencies
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