Review of the financial and budgetary situation and economic repercussions during the emergency situation
“Hosted by MIFTAH” interviews economic expert Muayyed Afana on the economic repercussions of the Coronavirus pandemic
**What does it mean to operate within the recently announced emergency budget? How does this impact economic sectors?
The emergency budget ratified by President Mahmoud Abbas is, in effect, the 2020 public budget with consideration to the current state of emergency due to the Coronavirus pandemic. This is a budget with a sizeable funding gap estimated at approximately NIS5 billion due to the expected setback in general revenues. In addition, there is the drop in foreign aid, which will certainly reflect on economic sectors given that the budget’s expected revenues are far less than its projected expenditures. Hence, there is a financial deficit that will be reflected in the PA’s ability to meet its obligations.
**Do the current circumstances call for operating within this type of budget?
There is no doubt the current situation is a state of emergency. However, we can still operate in accordance with the budget law by enacting Article 37 of the Public Budget Law.
**How much will this impact the private sector? How much should we invest in foreign aid under these circumstances?
There is no doubt that this state of emergency and the required budget for health purposes in addition to the drop in revenues will all cast a shadow on government priorities. Prime Minister [Mohammed Shtayeh] basically said this when he announced that the priority would be the health sector, support for the poor and employee salaries. All of this will impact the private sector. We should invest in foreign aid to support these priorities, especially with the economic downturn and the sharp drop in revenues.
**What are the direct economic impacts of the Coronavirus pandemic? Will we feel these impacts in the next phase?
There will be huge economic repercussions even though so far, the direct impact is not completely tangible. It will impact the economic cycle in general. What’s more, we expect a severe global economic recession to take place. The next phase will be characterized by economic downturn.
**How will our economy be impacted because of this crisis and which sectors will be hit the worst?
The Palestinian economy is fragile, largely due to the occupation, which is why it will be considerably impacted by the pandemic. It is too early to talk about which sectors will be most impacted given that the repercussions of this crisis are still ongoing; we cannot predict the outcome of this epidemic yet. However, our first prediction is that the tourism, commercial and small business sectors will be hit the hardest by this along with the poorest and most marginalized social sectors. This is because a large number of people in this sector lost their livelihood and have no alternatives, such as day laborers, workers in tourist facilities, in the trade and private sector, retail workers, vendors and outside markets. There are also the laborers who work inside the Green Line who will be equally as vulnerable if a complete closure is imposed, in addition to small business such as daycares and training and educational centers.
**What is the role of the state in protecting these sectors? In the Palestinian context, does this call for other kinds of intervention?
State interventions in Palestine take place through the Ministry of Social Development. The needs of poor and marginalized families have always been more than the available resources and budgets, even before the coronavirus crisis, especially since the poverty rate, at 32%, is so elevated. In the Gaza Strip it is even higher, reaching 53% according to the Palestinian Central Bureau of Statistics [PCBS]. This is why we need additional interventions by the state. The private sector must also be obligated to contribute, especially companies that are least impacted. The state needs to work towards providing the minimum requirements for families and not only use the database of poor families before the Coronavirus pandemic. Interventions must include all families who lost their source of income because of this.
**What are the projections for local taxes? How will this impact the role of the PA in securing the costs for managing this crisis?
Projections indicate to a sharp drop in revenues from local taxes given the halt of daily life and the paralysis of public and private facilities. This will greatly impact the provision of financial resources for the public treasury in Palestine. That is why the ratification of an action plan is imperative to manage public funds, which take these variables into consideration.
**What are the predictions for clearance tax money in the current crisis?
Clearance tax money will also be impacted by the downturn of the economic cycle. At the same time, Israel still deducts from these funds. My prediction is that these deductions will increase in the next stage. For example the [Jerusalem] Electric Company is finding it increasingly difficult to pay its dues to the Israel Electric Corporation. Israel will likely respond by directly deducting these dues from the clearance tax revenues.
**Will the PA’s ability to pay its civil servants be impacted?
Right now, I don’t think so, but if this crisis continues for a prolonged period of time, I expect it will.
**Which programs are most impacted in ministries? Development programs
**What kind of future situation is the private sector looking at?
In general, the private sector will be affected by the Coronavirus pandemic, but the degree of damage will vary according to the individual areas in this sector. For example, the tourist sector (hotels, restaurants, parks…) will be the most impacted while others will incur less damage.
**How do you evaluate the ability of donor countries to continue supporting the PA under these circumstances?
In general, there has been a huge decrease in international funding and support for the PA during the pandemic, however there are still countries that continue to meet their commitments such as the EU and Saudi Arabia. We do expect that some types of funding, especially for development projects, will be halted in this crisis. This is due to the impact it is also having on the donor countries themselves in addition to the complicated logistics involved in making the payments.
**Will there be real changes at the level of global economies?
Yes, I believe there will even though we are still in the transitional stage, which means it is difficult to predict the future course of these economies.
**Which sectors may be able to survive the Coronavirus pandemic?
In general, the economic cycle will be impacted but there are areas that will receive more attention than others such as the health, technology and distance learning.
**What will economic approaches look like post-Coronavirus?
It is too soon to tell but there will definitely be new approaches.
**If the crisis drags on, do you expect changes in the current global balances of power?
Yes, but this depends on how long the crisis continues and how extensive its financial and human cost will be.
Coronavirus and the civil society crisis Refaat Sabbah, head of the Palestinian Education Coalition: Beyond the state of emergency– the shortcomings
On the subject: “Beyond the emergency system—the shortcomings” Reefat Sabbah spoke with “Hosted by MIFTAH’ and posed several questions: “On what grounds are we standing? Were we really prepared for emergency crises? We have always spoken about emergency plans but did we actually have such plans in place?”
Analysis and Data
Sabbah maintained, “These are questions that require us to analyze the situation and data at hand to determine if we, as civil society organizations, are standing on solid ground or not. This current Coronavirus crisis has forced us to contemplate the reality of our situation and has revealed facts that may not be shocking but are still real.
We became preoccupied with developing long-term strategic plans and were distracted from the task of developing scenarios for any imminent danger. The pandemic has made us take a hard look in the mirror. We did not give enough attention to self-evaluation, which is our best judge as CSOs, whether as individual institutions or as a whole.
Points of weakness
In reference to civil society’s weak points, Sabbah says, “We can’t deny that this crisis was sudden, but this does not absolve us of our responsibilities. Any sudden event requires a quick response; this is why we need to identify the weak points that created these gaps. Other weak points require us to review our way of thinking, our working methodologies and even our guiding spirit. Based on this, the most significant diagnoses of the current crisis pertaining to CSOs are as follows:
One: Even though we are used to living through crises and states of emergency, still the most pessimistic among us could never have predicted a crisis of this magnitude, both in term of is temporal and geographic scope. We have lived through arbitrary quarantine before, but this is the first time we are living under voluntary quarantine.
Two: Anyone who believes we were prepared for this is mistaken. In reality, we were not prepared for this kind of crisis where everyone is in quarantine. Even in the midst of military Israeli incursions, we did not stop moving and we were always able to overcome tough times, whether during the first Intifada when schools were closed, or the second Intifada when cities and towns were closed off by checkpoints; even during Israeli army incursions when we were prohibited from leaving our houses, there was still space for movement.
Three: This time around, there is a lot of ambiguity surrounding the situation. We are in a time in which we don’t know how things are going to pan out, for two reasons: the first is because of the nature of the crisis and the second is because we are consumers of knowledge, technology and information. We wait for information from those in control of the internet. In both cases, we are content with being the receivers; we are not partners in the action like during the Intifada when we had the ability to make things happen.
Four: There is an overall feeling of confusion among all of us. We were forced into this against our will. Mingled with this feeling is one of global fear, which has begun to affect us too. Everyone is experiencing ‘frustrated hibernation” if you will. We were hardly out of our winter hibernation when we were railroaded by the reality of the Coronavirus.
Five: The overwhelming amount of information we receive from every direction has become a burden; it confuses and casts a shadow over us all.
Six: Because of this lack of clarity around us, speculation on matters has increased, which has also increased the proposal of random and improvised solutions. Some people feel they are contributing merely by proposing a solution only to realize that these speculations need closer review.
Seven: Technological capabilities, whether at the level of skills and knowledge or in terms of how prepared the infrastructure is: the crisis revealed that we actually were not prepared; plans at the official level revealed how unfamiliar they actually were with the data and information at hand. This begs the question: How many institutions took the time to familiarize themselves with data provided by the PCBS? And how updated was this data in the first place?
Eight: Many CSO’s were moving along parallel lines with no intersectionality. This means that civil society for the most part, was not constructed in a harmonious way. Hence, this crisis has prompted CSOs to contemplate their strategies, plans and programs.
Nine: Civil society does not have the expertise capable of regaining momentum. Much of this was depleted after CSOs could not maintain their pool of expertise because they were unable to afford higher salaries for this.
Ten: The structure of various NGO sectors and the mechanisms for coordinating between them are weak. These sectors, whether educational or otherwise, still suffer from a lack of a unified position in responding to risks.
Eleven: As we mentioned before, there is an apparent state of confusion, which perhaps stems from the fact that this crisis was so sudden and all-encompassing. However, the question is: hadn’t CSO’s adopted emergency plans?
Twelve: The crisis revealed this lack of preparedness and also the government’s failure to champion the slogans it touted about strengthening the relationship with civil society.
Therefore, no one should be surprised if the interventions, which were superficial and fleeting, do not touch at the core of this crisis. These have been interventions limited to releasing statements or conducting radio talks and spots.
Thirteen: The crisis is still ongoing and interventions are still possible but we must be careful that these interventions are not only aimed at “scoring a point” for the record. We support and need interventions that leave an impact.