The Biden administration is attempting to work around a law prohibiting it from contributing directly to the Palestinian Authority, while trying to boost funding amid Ramallah's warnings the organization is running out of money and potentially endangering the U.S. wish for it to govern Gaza once the Israel-Hamas war ends.
Palestinian officials are saying the government there could run out of money for essential government services and salaries as soon as the end of February, sources told The Wall Street Journal.
U.S. officials are concerned that without a boost for the Palestinian Authority's revenues, it will not remain stable enough to maintain its current hold in the West Bank or take on an expanded role in Gaza.
The authority's financial worries are also keeping it from implementing the overhauls the United States says will be needed to gain support from the Palestinians and Israel.
For years, the Palestinian Authority relied on assistance from the United States and Europe and taxes collected by Israel; however, former President Donald Trump's administration cut aid, and Israel suspended tax revenue after the Hamas attacks Oct. 7, leaving the government "on the verge of financial collapse," a senior Palestinian official told the Journal.
At first, Israeli Finance Minister Bezalel Smotrich suspended the delivery of all tax revenue, but then the Israeli government opted to suspend only revenues used to pay the Palestinian Authority's employees in Gaza, saying the money was going to fund Hamas instead.
The Palestinian Authority refused that move, saying it would not accept partial revenue transfers. According to official estimates, the organization pays salaries for about 150,000 public-sector employees in the West Bank and Gaza.
President Joe Biden asked Israeli Prime Minister Benjamin Netanyahu in December to transfer the frozen tax revenues to Norway to hold until an arrangement could be reached. In January, the Israeli government said it would agree to the plan, but there are still some matters to resolve.
The Biden administration is also working to resolve concerns about the aging leadership of the Palestinian Authority and its unpopularity in Gaza. It was ousted there in 2007 by Hamas.
The senior Palestinian official commented the authority has been facing financial crisis since 2020, and its finance ministry is operating under the "most restrictive budget" while paying only a portion of public servants and previous debt.
Meanwhile, in March 2018, Congress passed the Taylor Force Act, suspending economic assistance for the Palestinian Authority because it was giving payments to Palestinians accused of terrorism and to their relatives.
Trump also, in 2018, ordered the State Department to withdraw $200 million in aid that had been set for West Bank and Gaza programs, but Biden restored much of the aid after taking office in 2021.
The Senate passed its foreign aid package Tuesday, providing $14.1 billion for the Israeli war against Hamas and including almost nearly $10 billion for humanitarian aid for civilians in conflict zones, including Palestinians in Gaza.
The bill, however, is likely to face difficulty in passing in the GOP-majority House.
Sandy Fitzgerald ✉
Sandy Fitzgerald has more than three decades in journalism and serves as a general assignment writer for Newsmax covering news, media, and politics.
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