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Donors urged to help Palestinians

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(BRUSSELS) - Donor nations were under new pressure Wednesday to honour a $1 billion aid pledge to the Palestinians, as the prime minister warned that a fiscal crisis was threatening the government.

Salam Fayyad called for a "greater effort" to help the Palestinian Authority bridge a budget gap, stressing that its ability to provide services to its people and "continue to function... has been impaired already."

"The viability of the Palestinian Authority before we even become a state is really at stake, and it's in a great deal of jeopardy," Fayyad told reporters after a meeting of donor countries in Brussels.

Norwegian Foreign Minister Jonas Gahr Store, who chairs the so-called Ad Hoc Liaison Committee of donor nations, called on countries to redouble their efforts and urged Israel to lift restrictions on the Palestiian economy.

"We have sounded a clarion call that the financial situation of the Palestinian Authority is today in a critical state for two reasons," Store told reporters.

"One, that the growth potential of the Palestinian economy is limited by the occupation (and) limited access to key areas of the Palestinian territory," he said.

"And also that donors in the financial crisis and for other reasons are not fully living up to the pledges and the expectations," Store added.

A summary issued by the chairman after the committee meeting called on countries to ensure they provide the $1 billion (760 million euros) the Palestinians need for 2012.

The text said the crisis threatens to become protracted due to a decline in donor assistance but that nations recognised that the Palestinian Authority cannot slash its deficit on its own.

"Therefore, in the short-term, it is imperative that additional donor funding be identified and transferred immediately to reverse the crisis before it becomes totally unmanageable," the summary said.

The International Monetary Fund had urged donor countries Saturday to honour their promises to the Palestinian Authority, warning that its economy was entering a "difficult phase" and could further deteriorate.

In a report prepared for the donors' meeting, the IMF estimated a financing gap of about $500 million.

A drop in liquid assets has worsened due to a reduction in aid from Western and Gulf countries, as well as trade and movement restrictions imposed by Israel, it said.

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