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Source: World Food Programme (WFP)
20 August 2007

Gazans face the progressive collapse of their economy

Gaza, 20 August 2007 -
Arnold Vercken, WFP Representative in the occupied Palestinian territory, has warned of a progressive collapse of the Gazan economy as a result of border restrictions and a breakdown of services. Kirstie Campbell reports.

It is mid-morning on Salahadeen Street, the main thoroughfare into Gaza from Israel. It is an ordinary weekday but the streets, which are normally vibrant and noisy, full of colour and emotion, are eerily quiet.

The myriad militant groups who swarmed Gaza only two months before have vanished, replaced by a single Hamas force which has brought order back to its streets, even to its notorious traffic. But not everything is running so smoothly.

The rotting piles of rubbish that line Gaza's streets are a quiet indicator of what lies beneath the surface.

After months of acute insecurity and chaos, the situation today looks brighter in some respects but the costs of the new status quo are rising.

The shiny veneer hides a frustrated and bewildered population facing an absence of law, crumbling infrastructure, rising unemployment and a crippled economy.

Closed borders

Gaza's borders to Israel and Egypt have been closed most of the time since Hamas took over power in Gaza.

Only humanitarian supplies and a trickle of commercial goods have been allowed through. Israel controls the aerial and sea routes into Gaza and they have not been used for regular traffic for many years.

WFP is feeding 250,000 of the poorest people in Gaza. But if the economy continues its sharp decline more and more people will be unable to fend for themselves and will be forced to seek food aid from the UN.

Concern over impoverishment

Arnold Vercken, the head of WFP in the occupied Palestinian territory is gravely concerned by the rising growing impoverishment of Gazans.

"We are heading towards a progressive collapse of the economy in Gaza which could have tremendous humanitarian consequences in the near future," he said.

While Palestinian Authority (PA) employees have received some cash payments, their impact was short lived as accumulated debts quickly absorbed their salaries.

Diminishing self-sufficiency

However vital workers such as the municipality cleaners in Gaza City have not been paid. The absence of normal trade because of Gaza's economic isolation is crushing any remaining sense of self-sufficiency.

Farmers, factory owners, traders and daily labourers are the most directly affected but the impact is affecting the entire population.

The only shops keeping afloat are those selling basic food supplies. They are still able to import food, although prices are increasing due to the new crossing arrangements and supply difficulties.

Customers are buying but in smaller quantities. One merchant said he used to sell 50kg bags of flour; he now splits these into more affordable 10kg packets.


Abu Mohammed, a grocery store keeper in Rafah, is proud of the business he created and his ability to provide for his large extended family. However since mid- June, his situation has changed completely.

He is desperately in debt to his suppliers and is anxiously waiting for customers however it is unlikely that any will have the ability to pay in cash.

"My store has been quiet all day…I get an occasional customer but they have no money…they all want to purchase on credit…I cannot afford to allow this but I have no choice…some of my customers owe me over US$1,000 but I don't want to lose their business in the future,” he said.

Demand and supply dwindling

For non-food sectors, supplies and customers are seriously dwindling forcing shops and factories to close, cut staff or reduce production. According to Paltrade (an umbrella group to help promote Palestinian trade), 65,800 employees have been temporarily laid off in the past month, creating an environment of frustration and despair.

Rashid owns a factory which makes computer hardware and a business which supplies building materials. His father Amjad went to Tel Aviv several days ago on a special permit to try to negotiate with his Israeli supplier for the import of urgently needed cement and other raw materials.

"In the past he would have helped to facilitate the passage of my goods. This time the situation is hopeless. No one can help," he said.

Markets closed

Cash crop farmers who used to export strawberries, carnations and other goods to Israel have also had their markets closed and many will not plant next season's crops.

Furthermore, the division of the PA Ministry of Agriculture has rendered it unable to offer support to farmers.

Om Nasser, a mother of ten from Deir Al Balah explained her situation.

"I borrowed money from family and neighbours to plant and cultivate aubergines. I hoped to earn enough money to repay my loan and new seeds for next season, but the prices of aubergines is now so low that I cannot cover the costs of harvesting. I have had to watch them rot in the fields," she said.

Contact us
Kirstie Campbell
Tel. 00972 5459 18151

Robin Lodge
Tel: +39 06 6513 3201
Mobile: +39 340 8662992

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