Palestinian Authority has cash crunch amid statehood drive - latimes.com
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After earning international praise over the last two years for its financial reforms, the Palestinian Authority is facing its worst cash crunch in years, just as it hopes to prove to the United Nations that it deserves recognition as an independent state.
Palestinian banks, which lent the authority about $200 million to cover shortfalls, have stopped making new loans. Donations from the Arab world have plummeted in recent months.
To conserve cash, the authority, which is facing a $35-million monthly shortfall, said it will have to slash yet-unspecified expenditures and services.
In response to possible salary cuts, anxious public employees, including 80,000 security personnel, are threatening to walk off the job if not paid. Banks that once rushed to make home loans to authority employees have begun rejecting applications from government workers as too risky.
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Aid from Arab nations was above $500 million in both 2008 and 2009, but dropped to half that level last year. So far this year, it has dropped to about $79 million. Fayyad says the failure of these countries to live up to their pledges has spurred the crisis.