Palestinian Authority’s Progress in Governance Threatened, World Bank Says

The Palestinian Authority’s “substantial progress” in a two-year campaign to build institutions of statehood is threatened by delays in foreign aid and Israeli security restrictions, the World Bank said.

Palestinian governing mechanisms “compare favorably to other countries in the region and beyond,” the Washington-based World Bank said in a report released today. Still, economic growth has been “primarily donor-driven” and the private sector “remains stifled due to Israeli restrictions on access to natural resources and markets,” the bank said.

The report will be presented to a Sept. 18 meeting of donor nations, which is scheduled to be held in New York days before Palestinian leaders ask to be recognized as a state by the United Nations.

Economic growth in the West Bank and Gaza Strip is slowing, forcing the International Monetary Fund to revise its 2011 forecast for real growth in gross domestic product to 7 percent from 9 percent, the World Bank report said.

The authority has borrowed more than $1.1 billion from Palestinian banks, about 13 percent of their total assets, according to the report.

Prime Minister Salam Fayyad said in July that the authority had entered a financial crisis and could not pay full salaries to civil service employees because banks would not lend it more money and donor states hadn’t fulfilled their pledges.

The authority plans to pay August salaries a week late on Sept. 15 after two months of erratic paychecks, spokesman Ghassan Khatib said Sept. 10.

To contact the reporter on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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