Norway provides budget support to the Palestinian Authority

The Ministry of Foreign Affairs has decided to grant NOK 84 million in budget support to the Palestinian Authority (PA).

"The Ministry of Foreign Affairs has decided to grant NOK 84 million (USD 12 million) in budget support to the Palestinian Authority (PA)," said Foreign Minister Jan Petersen. "The support will be channelled through a newly established budget trust fund in the World Bank."

"The PA’s very difficult economic situation is the reason why we have decided to provide budget support," emphasised Mr Petersen. "The support will help to maintain central institutions that will form the foundation for a future independent Palestinian State. It is important that we help to ensure the PA’s further existence in the light of future negotiations on a final peace settlement."

"Payments from the fund will be contingent on continued progress in the reforms being carried out in the PA," said Mr Petersen. "The World Bank is responsible for financial auditing and ensuring that the reforms are actually implemented."

"As chair of the international donor group, I have also encouraged other donors to provide budget support," said Foreign Minister Petersen.

Background:

Because of the economic and social crisis in the Palestinian Area, the PA will also experience a substantial budget deficit in 2004. Therefore, the World Bank has, in co-operation with the PA, established a new fund for channelling budget support to the PA.

Payments from the fund to the PA are contingent on the PA fulfilling a number of conditions in connection with the reforms being carried out. The World Bank is responsible for financial auditing and ensuring that the reforms are implemented.

The initiative for the fund was taken at a meeting of the Ad Hoc Liaison Committee for Assistance to the Palestinians (AHLC) chaired by Foreign Minister Petersen in Rome in December 2003. At the meeting the World Bank and the IMF presented studies concluding that budget support is the most effective means of combating poverty in a situation where unemployment exceeds 30 per cent, and 50 per cent of the population are living below the poverty threshold. The support will be used to pay the salaries of 130 000 public employees and to maintain a minimum of public services.