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Cablegate: Pa Says Donors Failed to Deliver in February, Pa

VZCZCXRO8843
OO RUEHROV
DE RUEHJM #0358 0581620
ZNR UUUUU ZZH
O 271620Z FEB 08
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0713
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RUEHLO/AMEMBASSY LONDON PRIORITY 3980
RUEHFR/AMEMBASSY PARIS PRIORITY 3836
RUEHTC/AMEMBASSY THE HAGUE PRIORITY 0428
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS JERUSALEM 000358

SIPDIS

SENSITIVE
SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR GOLDBERGER/BELGRADE; EEB
FOR DEMARCELLUS; NSC FOR PASCUAL; TREASURY FOR CONNOLLY;
PARIS FOR DWYER
PLEASE PASS TO USAID FOR BORODIN

E.O. 12958: N/A
TAGS: EAID EFIN ECON PGOV KWBG
SUBJECT: PA SAYS DONORS FAILED TO DELIVER IN FEBRUARY, PA
NOW RUNNING OUT OF CASH


1. (SBU) At a meeting hosted by the World Bank on February
27, Ministry of Finance Director General Mazen Jadallah told
a group of key donors that contributions to the Palestinian
Authority (PA) have not materialized in February and the PA
was running out of money. According to Jadallah, the PA
received "ample" donor funds (about 460 million NIS (USD 128
million)) to cover PA expenses in January. Budget support
that the PA expected in February, however, "did not
materialize." Jadallah said only the EC (through its PEGASE
mechanism) has delivered in February -- 195 million NIS (USD
54 million). He said that the EC's contribution was about 75
million NIS (USD 21 million) more than expected because the
Netherlands and UK responded to urgent appeals for
assistance.

2. (SBU) According to Jadallah, the Arab Gulf states provided
no money in February, although he noted that Prime Minister
Fayyad is currently on a tour in the region that "is going
well." Jadallah said that February's cash crunch is
exacerbated by lower than expected clearance revenues from
Israel -- only about 170 million NIS (USD 47 million)-) due
to high GOI withholdings for electricity payments. Jadallah
told donors that the PA expects a 60-70 million NIS (USD
17-19 million) funding gap for February, which he said the PA
intends to finance through private bank loans so that it can
make its salary payments in the first week of March.
Jadallah appealed again for donors to make good on Paris
pledges to bring more predictability to PA fiscal planning.
In all, given contributions to date, the PA is looking at a
USD 400 million financing gap for 2008, concluded Jadallah.

3. (SBU) IMF Senior Resident Representative Joel
Toujas-Bernate said the IMF and PA are cooperating on budget
revisions that "reflect new assumptions," namely a revised
shekel/dollar exchange rate (from 4.15 to 3.6 shekels/USD)
and slower growth rates for the global, Israeli, and
Palestinian economies. The decline in the dollar will add at
least USD 100 million to the expected PA budget shortfall for
2008, said Toujas-Bernate.
WALLES

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