WEST BANK AND GAZA
REPORT TO THE AD HOC LIAISON COMMITTEE
KEY ISSUES
Context: With the hostilities in Gaza, the political and security environment has deteriorated markedly over the past months. There have been several attempts to forge a ceasefire between Israel and Hamas, brokered by Egypt, most recently on August 26, when an open-ended ceasefire went into effect. Nevertheless, prospects for a broader settlement of the Israeli-Palestinian conflict remain highly uncertain.
Outlook and risks: The economic outlook has deteriorated substantially, especially for Gaza, which has suffered devastating loss of life and property. While the conflict is focused on Gaza, disruption to economic activity has also occurred in the West Bank.
The outlook depends critically on whether the ceasefire agreement holds, what its eventual terms are, and the speed and size of the international community’s response to Gaza’s reconstruction and humanitarian needs. Key policy recommendations: The economic impact of the Gaza conflict is difficult to estimate at this stage, but the extent of the destruction and limited resources of the West Bank and Gaza (WBG) make international mobilization of aid crucial. The experience after the 2008/09 conflict indicates that without a lifting or at least easing of the blockade of Gaza, especially allowing the entry of construction materials, rebuilding efforts are likely to be unsuccessful. At the same time, it is vital that the Palestinian Authority, together with international partners, devise a robust fiscal mechanism to effectively deploy financial aid. This would help strengthen donor confidence that new resources will be effectively and transparently managed.
Finally, the WBG’s underlying fiscal strains have multiplied after the conflict, and with spending pressures bound to rise in the context of uncertain donor support, it is important that the Palestinian Authority maintains fiscal discipline.
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