Al-Ahly Team: Reforming the political system is a basic requirement for starting financial, institutional and administrative reform

Ramallah – Ma’an – The Civil Team for Supporting Public Budget Transparency held its 2024 conference, entitled: “Managing Public Money in Light of the War of Extermination and the Occupation’s Piracy of the Palestinian People’s Money and Resources,” in two sessions. The first session presented the reality of the general budget’s performance during the first half of 2024, accompanied by the most prominent decisions, procedures and laws taken and approved by the Palestinian Authority within the framework of financial reform and their impact on public money. The second session addressed the ambiguity of the financial relationship with the occupation, the steady rise in what is known as net lending, and the clearing crisis between local authorities and the state treasury.

Current challenges require the government to adopt a participatory and open approach in managing public funds.

The conference began with a speech by the Executive Director of the Aman Coalition, Issam Haj Hussein, who noted the Ministry of Fi
nance’s participation in the Civil Team conference after a long hiatus. He stressed that the conference is a contribution from the Civil Team to provide practical recommendations on the most appropriate mechanisms for managing public funds, while identifying priorities in light of the exceptional and compelling circumstances experienced by the Palestinian people, from a war of extermination that is still happening live in front of the world, accompanied by the ongoing settler invasions and attacks in the West Bank, which have affected the land, trees, facilities and infrastructure of the Palestinians, and extended to the occupation’s piracy of the Palestinian people’s money by stealing half of the clearing funds, while inventing new channels to dry up the financial resources of the public treasury, and the decline in local revenues due to the deterioration of the already fragile and troubled economic situation before the war. Haj Hussein also stressed the Aman Coalition’s continued role in holding accountable
the implementation of policies, procedures and decisions, and how the government managed and is managing the budget, stressing the need to exert pressure to direct the scarce financial resources towards strengthening steadfastness in the face of the practices of the Israeli occupation.

It was stressed that the involvement of civil society in decision-making and priority setting remains weak, as the publication of Cabinet decisions remains fragmented, which constitutes an obstacle to civil society in exercising its role in accountability. It is also worth mentioning the lack of participation of civil society institutions in preparing the government emergency plan for 2024, or in preparing the emergency interventions included in it, which focus on relief and reconstruction.

Aman calls for forming a national team to prepare and supervise the implementation of a participatory and comprehensive national plan for reform

Hajj Hussein expressed the Aman Coalition’s welcome of the measures and decisions announced b
y the government within the framework of controlling spending and enhancing revenues, in implementation of the reform agenda, including financial, administrative and institutional ones, stressing the need for all official parties to adhere to this, in a manner that does not contradict the reform orientations, provided that this includes presidential decisions and decrees. Hajj Hussein, in turn, called on the government of Prime Minister Dr. Mohamed Mustafa to prepare and adopt a general policy that is published and binding on all public institutions, in which the government defines its relationship with civil society institutions, and that the government’s orientations be within the framework of a participatory and comprehensive national reform plan, in which a national team representing all sectors participates in preparing and supervising its implementation, with the participation of independent experts who enjoy professionalism and competence, stressing also the need for the Council of Ministers to adopt t
he national cross-sectoral strategy to enhance governance and combat corruption under the management and supervision of a national team with clear reference, tasks and powers, in addition to developing a national follow-up and evaluation system for the implementation of the strategy.

NIS 6 billion in deducted clearance funds and NIS 44 billion in public debt, with net lending item rising to record levels

Lamis Farraj, coordinator of the Civil Team for Supporting Public Budget Transparency, reviewed the semi-annual report on the performance of the 2024 general budget, which concluded that there were modest and limited attempts to confront the financial challenges in the first half of the year, without a radical approach to confront the ongoing piracy of clearance funds and financial challenges, as the main issues that drain the general budget still exist. The report indicated that the occupation continued to deduct clearance funds, as the total frozen funds amounted to nearly 6 billion shekels, while expendi
tures were reduced very slightly and linked to the war of extermination, such that they did not appear clearly during the first half of the year. It also showed an increase in the net lending item that may exceed what was estimated for the year 2024, reaching an unprecedented record level. The semi-annual report also highlighted the increase in the deficit in the general budget and the possibility of it doubling by the end of the year, which means an increase in the public debt and financial obligations of the government, which have accumulated to 44 billion shekels, and thus the weakness of the government’s ability to fulfill its obligations and the decline in government services.

Decrease in operating expenses achieved by the Ministry of Health

The report showed a decrease in the operating expenses of the Ministry of Health, which include purchasing the service from outside the Ministry of Health, medicines, consumables and laboratory materials. In addition, it showed a decrease in medical transfers witho
ut a tangible development in government services for citizens during the first half of the year. In addition, the report indicated the lack of progress in reducing expenses in the security sector, especially after the formation of a committee to review its special expenses within the financial and administrative reform package.

Security Recommendation: Expand the scope of spending cuts and control and address the salary and quasi-salary bill in the civil and security sectors, medical transfers and the net lending item

The report presented a set of recommendations, most notably the need to work on expanding the scope of reducing and controlling spending, and addressing the core issues in the general budget, which drain the largest share of the budget, which includes the salary bill and quasi-salaries in the civil and security sectors, medical transfers, and the net lending item, with the development of a practical plan to address the accumulation of debts of local authorities and distribution companies that
work to collect their electricity and water service fees in advance from citizens, especially since net lending reached record levels of 912 million shekels in just 6 months of 2024.

Some decisions are in conflict with the government’s approach to financial reform.

The session was completed with a presentation by the member of the Civil Team, Lamis Al-Shaibi, on the procedures, decisions and laws taken and approved by the Palestinian government within the framework of financial reform and their impact on public funds during the period extending from April 2 to September 30, 2024, numbering 193 decisions, with the aim of monitoring developments in the reform process. Al-Shaibi began her presentation by talking about the issuance of Decision-Law No. (9) of 2024 regarding the general budget for the fiscal year 2024, published on 8/26/2024, due to the inability to submit the draft general budget for the fiscal year 2024 within the legal deadlines, i.e. after 7 months have passed since the fiscal year, and after
the end of the extension period for the 2023 budget at the end of July, as an exception to what is stated in the General Budget Regulation Law No. (7) of 1998, and what this entails in terms of constitutional violations and the legislation regulating the preparation and approval of the general budget. Accordingly, the decision-law allowed the government to submit it no later than 06/30/2024 AD, while granting the Ministry of Finance the authority to collect revenues and continue spending with monthly appropriations at a rate of (1/12).

Amending the law on bonuses and salaries of the legislature, government and governors contradicts the government’s orientations towards reform and rationalization of expenditures

Al-Shuaibi listed some points that conflict with the government’s approach to financial reform, such as the decision-law on bonuses and salaries for members of the Legislative Council and governors, according to which senior employees in the Palestinian National Authority (those appointed to the rank
of minister and heading a government department) were granted the retirement benefits granted to ministers, members of the Legislative Council and governors, which means that they receive the retirement salaries granted to ministers, without paying contributions to the General Retirement Fund.

Formation of a higher national committee to undertake the restructuring process of non-ministerial public institutions

In addition, Al-Shuaibi also addressed the Decree-Law No. (6) of 2024 regarding the separation of the industrial and national economy sectors, which restored the legal personality and independent financial status of the Industrial Cities and Free Zones Authority, while she also referred to Decree-Law No. (11) of 2024 regarding the abolition of the legal personality and independent financial status of the Agricultural Risk Mitigation and Insurance Fund. Accordingly, the Ministry of Agriculture is considered the legal and actual successor to the Agricultural Risk Mitigation and Insurance Fund, and bears
all obligations arising from it, and its tasks, allocations, properties, assets, funds, rights and employees are transferred to it. Al-Shaibi pointed out that the governance of non-ministerial government institutions and the correction of their conditions is considered a support for the Palestinian government’s efforts to control public spending and reduce the general budget deficit. However, the confusion in cancelling the legal personality at one time and restoring it at another time leads to the instability of these institutions, which requires the issuance of a decision by the Council of Ministers to form a higher national committee to undertake the process of restructuring non-ministerial public institutions.

Various comments

The Director General of the Budget, Mr. Tariq Mustafa, commented, indicating that the Ministry of Finance deals with the numbers with caution as they reflect services provided to citizens, adding that in the health sector alone, since the beginning of October 7 until now, about on
e million Palestinian citizens have been added to the government health system, as a result of the presence of 200 thousand Palestinian workers and their families who were working in ‘Israel’ and were treated in private hospitals, as the Palestinian government became responsible for them after October 7.

Dr. Nasr Abdel Karim commented that the current catastrophic situation requires a different approach to dealing with it by all parties, which requires a real political will for reform, along with reforming the Palestinian political system through elections, and the presence of a legislative council that includes representatives of the people to monitor and hold accountable the reform processes and government policies, provided that the heart of the reform process is the sustainability and steadfastness of the Authority in the face of the occupation policies that seek to weaken it. Abdel Karim also pointed out the need to focus on economic and social justice in distributing burdens and opportunities, by looki
ng at the structure of expenditures and revenues, examining the gaps in salaries, and the need to correct tax justice. Abdel Karim called for the need to develop a plan over several years aimed at reducing the public debt deficit. He also pointed out that reform is not useful without talking about political reform, as it is the solution to all reforms, followed by legislative reform, then institutional reform, and finally financial reform.

Ms. Nihad Younis, Director General of the Palestinian Institute for Public Finance and Taxation, pointed out that our existence under occupation did not enable us to achieve natural institutional growth, which requires official public institutions and civil society to unify their efforts in order to face the stage together, with the aim of emerging from it.

Dr. Azmi Al-Shuaibi, Advisor to the Board of Directors of the Aman Coalition for Anti-Corruption Affairs, commented, criticizing the continuation of work without declaring a state of emergency, despite the exceptional
circumstances that the Palestinian people are going through, pointing to decisions taken in the President’s Office that pose challenges to current reform trends, and recalling the case that the Aman Coalition is still being tried for, against the backdrop of what was revealed in its fifteenth report issued in May 2023, entitled: The Reality of Integrity and Combating Corruption in Palestine for the Year 2022 under the slogan: (Occupation, Division and Political Corruption: A Closed Circle, Each Feeds the Other), about the circumstances of the crime of laundering settlement dates, the relationship of public officials to the case, and attempts to address it outside the normal course of the investigation.

The level of transparency in the financial relationship between the Palestinian Authority and the occupying state is ‘low’

In the second session, economic researcher Mu’ayyad Afana reviewed a report entitled: “Transparency in the Financial Relationship between the Palestinian National Authority and Israel”, l
isting the aspects of the occupation’s theft of the Palestinian people’s money, with a list of some of the problems that, once resolved, will provide the public treasury with good revenues that will alleviate the financial crisis suffered by the Palestinian Authority. The report concluded that the level of transparency in the financial relationship between the Palestinian National Authority and Israel is “low”, as Israel (as an occupying power) adopts a unilateral, selective approach in the financial relationship with the Palestinian Authority, and the financial relationship is closely linked to the political path, as disputes increase as a case of blackmail at every political stage. The report also concluded that the Paris Economic Protocol is a loose protocol that is no longer valid, and that Israel does not abide by it, but rather constantly violates it.

The occupation uses the clearing as a tool to punish the Palestinian people

The report stated that the clearance revenues, which constitute the backbone
of the general budget, have become a tool in Israel’s hands to punish the Palestinian people, through deductions, withholdings, and withholding of funds, as Israel’s appetite is still open to steal more money in this area, not to mention net lending, which has increased to an unprecedented extent in the past five years. The report also clarified the existence of entanglement and overlap in the financial relationship between the Palestinian Authority and Israel in many areas of that relationship, which deepens the decline in transparency and dispersion, for example: the electrical connection points for local authorities, distribution companies, and the private sector, which reach 250 points, not to mention Israel receiving 500% of the estimated value for managing the clearance revenues, after collecting 3% of the clearance revenues as a management fee, although the percentage does not exceed (0.6%) according to World Bank reports. Moreover, Israel only recognizes the transfer of invoices and clearing for compa
nies registered with the Palestinian Authority (before the 2007 division), which has made many companies established after that unregistered, thus wasting revenues due to the public treasury.

Political will must be provided to put an end to the financial bleeding and recover the looted resources of the public treasury.

The report recommended the necessity of preparing and launching an integrated national strategy in order to collect the economic and financial rights of the Palestinian people usurped by Israel, and unifying work to put an end to the financial bleeding, and emancipation from Israeli control over the economic resources plundered by the Palestinian people, by shifting towards working mechanisms that guarantee the independence of the Palestinian Authority and its right to its funds and revenues with the aim of economic disengagement from the occupation, and setting government policies to stimulate the local economy, enhance local revenues, reduce dependence on clearance revenues, and implement t
he principles of transparency, even unilaterally, by publishing agreements and making information available to the public, in addition to adopting a computerized system to link financial transactions electronically (electronic clearing), in addition to launching a pressure and advocacy campaign to enforce economic rights, and filing global human rights lawsuits against Israel and its public piracy of the Palestinian people’s funds, and recruiting friendly countries and human rights institutions to file these lawsuits, in addition to the lawsuit filed by South Africa against the occupation in the International Court of Justice.

Clearing crisis between local authorities and the state treasury

Meanwhile, economic researcher Kaid Tanbour reviewed a report entitled: ‘Challenges of implementing financial policies related to clearing between local authorities and the state treasury,’ in which he summarized how the occupation stands as an obstacle to clearing between local authorities and the state treasury, by the
former’s refusal to provide electricity to a single Palestinian entity that is responsible for distribution.

Tanbour pointed to challenges specific to local authorities, which make them unable to pay electricity and water prices to suppliers, the weakness of local authorities’ procedures in managing electricity purchases and distribution, and the weakness of oversight procedures on this, the decline in citizens’ confidence in local authorities, the depletion of the salary bill for the budget of many local authorities, in addition to the Ministry of Finance’s failure to transfer local authorities’ dues on time, and the weakness of government support for local authorities. He also listed challenges specific to the state treasury, the absence of data necessary for the clearing process, and the rise in the expenditure bill, especially the salary bill, which amounts to half of the expenditure.

The report came out with a set of recommendations, the most important of which are: the necessity of enforcing laws agai
nst violators of payment, reforming the electricity and water sectors starting with identifying the party responsible for each sector, adopting prepaid meters and incentives for payment, working to benefit from alternative energy to generate electricity to reduce dependence on the Israeli supplier, strengthening governance in local authorities by approving an administrative and financial system for heads, members and employees of local authorities in addition to codes of conduct, adopting more transparent principles by local authorities in all their work, decision-making mechanisms, publishing administrative and financial reports, openness and participation with the local community, with the necessity for the Ministry of Finance to commit to transferring financial dues to local authorities on time, in order to help local authorities meet their obligations, without having excuses for using electricity and water collection funds.

Various comments

In turn, Mr. Louay Hanash, from the General Administration of C
ustoms, Excise and Value Added Tax, commented on the relationship with the Israeli side, as it collects 65-68% of local tax revenues, without any transparency in the exchange of information, stressing the occupation’s complete control over accounting matters, and its acquisition of a collection commission arbitrarily and without justification.

Mr. Magdy Hassan, General Manager of the Petroleum Authority, confirmed that there are no proper accountability mechanisms with Israel, and that deductions are made without legal justification, and that the Authority succeeded in reducing the commission for managing the petroleum file to only 1.5%.

Ms. Haya Karmi, Director of the Financial Department of Local Authorities/General Administration of Guidance, Control and Budgets, reported that citizens were failing to pay the fees due from them in relation to the revenues collected by the local authority, which forced some local authorities to consume the money coming from water and electricity in projects to develop the
ir towns, as well as the Ministry of Finance’s failure to comply with the revenues it collects from government institutions and others (such as properties and professional licenses).

In turn, Dr. Ibrahim Rabaya pointed out the need to reconsider the crisis of local authorities as a complex revenue crisis, as there is no ability to plan, invest, collect and manage financially, including bringing in partnerships or forecasting revenues, which deepens the clearing crisis. Rabaya pointed out the need for a political resolution, as the issue is not only financial, recommending the importance of having an intermediate management and assessment body based on assessment and redefining the relationship between all components, which ultimately requires strengthening the relationship with the citizen.

Source: Maan News Agency