September 17, 2012–As the Palestinian Authority marks the 19th anniversary this month of the signing of the Oslo Accords, the agreement with Israel that brought it into existence, the authority is facing a financial crisis that experts say could threaten its future operations and stability.

The International Monetary Fund said last year that the Western-backed authority had built the institutions and sound fiscal policies for running the economy of a future state. Oussama Kanaan, the fund’s mission chief for the West Bank and Gaza, said in an interview that on that count, nothing had changed.

But there is no state in sight and the Oslo Accords, which were meant as interim arrangements giving the Palestinians limited self-rule, have stretched on for nearly two decades, perpetuating what critics say are conditions that are now limiting economic development. The authority needs $400 million in immediate assistance to cover a gap in its 2012 budget and has been confronted with growing public outrage over austerity measures and steep price increases driven largely by outside forces.

Beyond that, though, to build a sustained economic recovery, reduce unemployment and support the authority’s reforms, Mr. Kanaan said, it is essential that the restrictions that Israel places on Palestinian trade and movement be eased and that donors provide adequate aid. Otherwise, he warned, “The gains made in recent years in institution-building and reforms would unravel, and ultimately, the Palestinian Authority would not be able to operate.”

Mr. Kanaan, who was speaking by telephone from Washington, based his assessment on the results of a recent fact-finding trip he led to the Palestinian territories. A report on those findings will be presented on Sept. 23 at a donors’ conference at the United Nations.

The report will state that the West Bank-based Palestinian Authority faces “serious risks,” including an inability to make essential payments, like salaries, with all the implications that has for stability. The authority employs about 180,000 Palestinians, among them the security forces. Those employees, in turn, support relatives estimated to include about a quarter of the population of the Palestinian territories, including the Gaza Strip, which is run by Hamas. In June, July and August, the authority was unable to pay its employees their full salaries on time…Read More>>

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