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Source: International Monetary Fund (IMF)
7 March 2005



De Rato vows IMF support for Palestinian reforms,
urges stronger economic cooperation in Maghreb region


IMF Managing Director Rodrigo de Rato pledged enhanced IMF support for the Palestinian National Authority’s efforts to build sound economic and financial institutions and improve the economy at a London meeting on March 1. “We are now at a critical juncture, and the international community should stand ready to fully support Palestinian reforms to strengthen governance and promote economic development,” de Rato said at the meeting hosted by the U.K. government and attended by foreign ministers from 23 countries. Participants agreed to help the Palestinian Authority strengthen its governing institutions, combat corruption, and unify its security forces. They also pledged up to $1.2 billion toward the reform efforts.

Taking a brief diversion from a trip to the Maghreb region, de Rato told meeting participants that on top of the enormous human cost, the past four years of conflict have dealt a severe blow to the Palestinian economy. Real per capita income has dropped by 35 percent, unemployment remains high at 26 percent, and about half of the Palestinian population lives in poverty. This has led to a grim fiscal situation, which is highly dependent on external budget support.

But despite the difficult environment, de Rato noted, the authorities have continued to implement reforms and improve transparency and accountability in public finances.He welcomed President Mahmoud Abbas’ reform program to improve public services and create a more transparent environment for investment decisions.He said the reforms will require a large amount of external financing to cover budget shortfalls, repay commercial bank debt and arrears, and finance pensions, social safety nets, and the restructuring of security agencies.

Enhanced IMF technical assistance, including through the IMF’s Middle East Technical Assistance Center in Beirut, will focus on modernizing tax administration, strengthening the customs office, and improving the payments system and banking intermediation to facilitate private sector development. The Palestinian National Authority is not a member of the IMF and hence is not eligible for financial support.However, at the request of the international donor community, the IMF has worked closely with the Authority on fiscal and monetary policy issues and has provided regular reports on the fiscal position.

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(excerpted from IMF Survey, Vol. 34, No. 4, a publication of the International Monetary Fund)


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