世界银行-巴勒斯坦权力机构公共支出审查_螺旋式财政危机中的政策优先事项（英）-2025.6_172页_5mb

Public Expenditure Review of the Palestinian Authority: Policy Priorities Amid a Spiraling Fiscal Crisis

Core Content

The Public Expenditure Review (PER) of the Palestinian Authority (PA) analyzes the fiscal and economic challenges faced by the West Bank and Gaza, particularly in the context of the ongoing conflict. It highlights the structural fragility of the PA's fiscal system, exacerbated by the Israeli occupation, economic restrictions, and the severe humanitarian and economic impact of the conflict. The review provides an in-depth examination of public expenditure trends, focusing on the civil service wage bill, the pension system, and the education and health sectors, which together account for a significant portion of government spending.

Key Fiscal Challenges

• Ongoing Conflict: The conflict in the Middle East, especially in Gaza, has turned the pre-existing economic and fiscal fragility into a full-blown crisis.
• Economic Impact: The economy contracted by 27% in 2024, with Gaza experiencing a -83% contraction and the West Bank a -17% contraction.
• Unemployment: Unemployment in Gaza reached 80%, while in the West Bank it rose to 33.5%, the highest level on record.
• Fiscal Deficit: The PA's fiscal deficit increased from 3.7% of GDP in 2022 to 15% of GDP in 2024 due to the conflict.
• Fiscal Constraints: The PA is heavily reliant on foreign aid (which dropped to 2% of GDP in 2023) and domestic debt (reaching 85.7% of GDP by end-2024).
• Arrears Accumulation: Arrears to the private sector reached US$1.5 billion (9% of GDP), with US$3 billion (22% of GDP) owed to the civil service pension fund and US$1.47 billion (10.7% of GDP) to public employees.

Main Views and Key Findings

1. Macroeconomic and Fiscal Trends

• The real GDP growth has been consistently low, and the fiscal situation has deteriorated significantly.
• Fiscal revenues have declined, with clearance revenues (collected by Israel on behalf of the PA) being heavily deducted, often in defiance of the Paris Protocol.
• Public expenditures are high and rigid, with the wage bill accounting for the largest share of spending, while capital investment remains low.

2. Public-Sector Wage Bill

• The wage bill is a major driver of public expenditure and has been growing due to various factors such as allowances, salary premiums, and employment expansion.
• Public employment has increased, with a notable share of non-fixed contract employees.
• Wage rigidity and employment inflexibility have limited the PA's ability to adjust spending in response to economic shocks.
• Reform priorities include:
  • Implementing wage freezes and indexation.
  • Reducing allowances and wage premiums.
  • Freezing public employment to reduce fiscal pressure.
  • Improving public financial management and wage benchmarking.

3. Pension System

• The pension system is under significant fiscal strain, with high replacement rates and low funding.
• Old-age dependency ratios are expected to rise, increasing the financial burden on the pension system.
• Reforms include:
  • Adjusting retirement eligibility rules.
  • Introducing defined-contribution (DC) schemes.
  • Reducing benefits and allowances.
  • Implementing voluntary retirement schemes (VRS) to reduce the number of retirees.

4. Health System

• The health system faces severe challenges, including limited public health spending, high out-of-pocket (OOP) expenditures, and inadequate service delivery.
• Financing flows are constrained, and public health spending is below the regional average.
• Key findings:
  • OOP spending is a major burden on households.
  • Health service delivery has been severely disrupted, especially in Gaza.
  • Public health spending is heavily concentrated in certain areas and not evenly distributed.

5. Education System

• The education sector is a major component of public spending, but performance indicators such as PISA scores and student-teacher ratios show mixed results.
• Education spending is high, but efficiency and impact are questionable.
• Recommendations include:
  • Improving public financial management.
  • Enhancing teacher salaries and working conditions.
  • Reducing student-teacher ratios.
  • Implementing reforms to improve learning outcomes and educational access.

Key Recommendations

• Cease hostilities in Gaza and provide urgent reconstruction funding.
• Strengthen fiscal cooperation with the Government of Israel (GOI) and work towards a permanent resolution of the Israeli-Palestinian conflict.
• Implement wage reforms to reduce the wage bill and improve fiscal flexibility.
• Revamp the pension system through defined-contribution (DC) schemes and voluntary retirement schemes (VRS).
• Enhance public financial management to improve budget execution, transparency, and efficiency.
• Boost education and health spending in a more targeted and effective manner, ensuring better outcomes and equity.
• Increase donor support and ensure predictable and adequate budget funding to support reforms and fiscal sustainability.

Conclusion

The Public Expenditure Review highlights the deepening fiscal crisis in the West Bank and Gaza, driven by the ongoing conflict, economic restrictions, and inadequate fiscal management. The PA must prioritize reforms in public spending, especially in the wage bill, pension system, and education and health sectors, to achieve fiscal sustainability and economic recovery. Donor support and cooperation with Israel are essential to address the structural challenges and financial constraints that the PA faces in the post-conflict environment.