World Bank threatens to cut off aid to PA
The Scotsman: PA given ultimatum to either end rampant corruption or lose hundreds of millions of pounds in foreign aid.

The World bank’s top official in the region, Nigel Roberts, said Yasser Arafat had to stop the handing of large cash payments to his security commanders - used to keep them loyal to Arafat personally - and other corrupt financial practices. If this did not happen, he said, the Palestinian Authority risked losing the support of the international community.

In an interview with The Scotsman Roberts said the Palestinians were receiving the largest amount of money per capita in the history of foreign aid but this was still not enough to balance the budget. He said it was now crunch time for the Palestinian Authority, either support the reformers led by Finance Minister Salam Fayad, or face financial ruin.

At a conference of foreign donors in Rome last year, the Palestinian Authority (PA) asked for $1.2bn (£645m) to alleviate its current financial crisis. Roberts said: "To get that money will require a very forceful program of continued commitment to reform by the PA and by the Palestinian Ministry of Finance. Without evident commitment and progress towards tightening these systems and improving accountability, the PA will not get the money it needs." A massive hole has appeared in the Authority’s budget, which has been hard hit by Israeli military closures of Palestinian areas and other measures aimed at halting Palestinian terror attacks. In the years leading up to the Intifada, aid averaged £240m a year. It soared to £645m in 2002 before falling back to £475m last year, a drop of 14%.

Roberts said this amount of aid to one area was unparalleled. "The level of assistance in the three years since the Intifada is at an extraordinary high level", he said. "It’s a level of something over $300 (£160) per capita. According to our calculations, that is the highest per capita aid transfer in the history of foreign aid anywhere". Roberts said that while there had been a reduction in aid, this was mainly the result of a cut from Arab League States and a smaller amount from the European Union.

At the moment Arafat personally pays commanders in cash, rather than paying every serviceman via their bank accounts. Observers say this is designed to benefit Arafat, by making the commanders and officers feel dependent on his goodwill. In adition to the obvious potential for corruption, this enables Arafat to thwart any attempts at reforms by ensuring the security forces reman loyal to him personally, not the institutions of the PA.