The deepening of the economic crisis and political instability in the occupied Palestinian territory since 2000 has aggravated Palestinian fiscal imbalances, with adverse consequences for the economy´s development prospects.
Revenue mobilization is constrained not only by the erosion of the tax base, but also by the lack of economic diversification and growing de-formalization, rendering taxation of limited benefit in improving the Palestinian Authority´s fiscal position.
This means that the Palestinian Authority will have to continue to rely on international aid for financing its expenditures, at least for the immediate future.
The Palestinian Authority is also seeking other sources of funds to cover its capital expenditures, particularly loans from multilateral and bilateral sources. This trend is likely to intensify in light of the marked shift in donors´ preferences from grant-based to loan-based assistance, thereby running the risk of increasing the Palestinian Authority´s public debt obligations.
While the management of Palestinian Authority finances has been revitalized in recent years, there remains much room for improvement, particularly in relation to fiscal planning and budget management systems and processes.
The Palestinian Authority lacks the required tools and expertise for linking economic and development planning to the budgetary process, as well as the institutional capacity to monitor, control and forecast debt and debt-related problems.
Technical assistance projects under this programme cluster seek to assist the Palestinian Authority in developing efficient, effective and transparent fiscal management systems and processes.