VZCZCXRO5319
OO RUEHROV
DE RUEHJM #1342/01 2061437
ZNY CCCCC ZZH
O 241437Z JUL 08
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2262
INFO RUEHXK/ARAB ISRAELI COLLECTIVE IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE C O N F I D E N T I A L SECTION 01 OF 02 JERUSALEM 001342 
 
SIPDIS 
 
NEA FOR FRONT OFFICE; NEA/IPA FOR GOLDBERGER/SACHAR; NSC 
FOR ABRAMS/PASCUAL; TREASURY FOR ROSE 
DEPT PLEASE PASS TO USAID FOR ANE/MEA:MCCLOUD/BORODIN 
 
E.O. 12958: DECL: 07/23/2018 
TAGS:                  
SUBJECT: PA NEEDS ARAB SUPPORT TO MAKE JULY SALARY PAYMENTS 
 
REF: A. JERUSALEM 1201 
      B. RIYADH 1137 
 
Classified By: Consul General Jake Walles for reasons 1.4 (b) and (d). 
 
 1. (C) Summary.  Palestinian Authority (PA) Ministers have 
publicly stated that the PA will not be able to pay July's 
salaries without receipt of additional "Arab and foreign" 
assistance.  So far in July, the PA has received only the 
European Commission's monthly contribution of USD 23 million 
(which was used to pay June salaries at the beginning of the 
month).  Promises of additional Arab support (from Saudi 
Arabia, Kuwait and the UAE) have not yet materialized.  End 
Summary. 
 
Financial Crisis Ahead? 
----------------------- 
 
 2. (C) The PA Ministers of Foreign Affairs and Planning have 
each spoken publicly in recent days of a "financial crisis" 
that will make it impossible for the PA to pay its employees' 
July salaries (due the first week of August) absent 
significant additional outside assistance.  PA Ministry of 
Finance Director General Mazen Jadallah told EconChief on 
July 24 that PM Fayyad has decided that there would be no 
partial payment of salaries if the PA does not receive the 
necessary budget support this month. 
 
 3. (SBU) The PA pays approximately USD 130 million/month in 
salaries.  It also committed to paying wage arrears 
accumulated under the Hamas government at a rate of 
approximately USD 20 million/month.  In addition, Jadallah 
reports that the PA was forced to take substantial bank loans 
last month, part of which must be paid off before the banks 
will agree to execute salary payments.  Jadallah believes 
this will require an additional USD 40 million.  All told, 
the PA needs approximately USD 190 million before the first 
week of August.  (This requirement does not include the PA's 
USD 70 million/month non-wage operating budget.) 
 
 4. (SBU) During the first week of August, the PA expects to 
receive the EC's monthly contribution of USD 23 million and a 
clearance revenue transfer from the GOI of approximately USD 
80 million.  Jadallah said the PA is focused on promises of 
Saudi, Kuwaiti, and Emirati assistance to fill the remaining 
gap. 
 
PA reports lower Saudi support figures 
-------------------------------------- 
 
 5. (C) PA reporting of assistance from Saudi Arabia does not 
track with the amounts reported ref B.  So far in 2008, the 
PA reports that it has received budget assistance from Riyadh 
totaling USD 77,383,263.  The PA Ministry of Finance expects 
a further USD 15.5 million to be transferred in the coming 
weeks, but they do not have confirmation.  When that payment 
is received, Saudi Arabia will have fulfilled the budget 
support component of its Paris pledge, equivalent to its 
annual Arab League quota of USD 92 million. 
 
 6. (C) According to PA Presidential Advisor Majdi Khalidi, PA 
President Mahmud Abbas (Abu Mazen) was promised USD 250 
million by King Abdullah in 2007.  (Post believes this is 
likely the "voluntary contribution" referenced reftel.) 
Khalidi understands this money was allocated to the "Saudi 
Fund" in 2007 to finance projects in the West Bank and Gaza 
-- not as budget support for the PA.  The PA successfully 
lobbied to have USD 50 million of that sum transferred as 
budget support in May 2007 (under the NUG).  The remaining 
USD 200 million remains in the Saudi Fund and, according to 
Khalidi, there are no ongoing disbursement discussions.  When 
President Abbas has referred to this money in previous 
discussions with the Consul General, he has quoted King 
Abdullah telling him the funds would be transferred "when you 
ask" and implying the funds could be used as Abbas wanted. 
 
 7. According to Khalidi, the PA is also trying to convince 
Riyadh to transform part of its USD 500 million Paris pledge 
of project support into cash assistance.  Khalidi says the PA 
has not given Riyadh a specific amount, but is hoping for 
something on the order of USD 150 million.  Jadallah says the 
PA has been asking the Saudis for a meeting for the past two 
months, but has not received "any answer." 
 
 8. (C) Post is unable to identify the other budget support 
figures reported reftel (totaling USD 80.8 million).  Those 
figures do not correspond to any 2008 assistance received, as 
 
JERUSALEM 00001342  002 OF 002 
 
 
reported by the PA and reviewed by at least two IMF Missions. 
 Saudi assistance to the Jerusalem Fund, the Rafah Housing 
Fund and as "piecemeal donations" does not correspond to any 
pledge and does not contribute to the PA's recurrent budget 
needs.  (Post also has no authoritative way to track them.) 
 
Waiting for Kuwait, 
Hopeful of the UAE, 
and Resigned on Qatar 
--------------------- 
 
 9. (C) Both Khalidi and Jadallah confirmed on July 24 that 
the PA has heard nothing more from Kuwait on the status its 
pledged USD 80 million transfer through the World Bank Trust 
Fund.  Khalidi told EconChief on July 24 that he was "trying 
in every way" to encourage the Kuwaitis to transfer these 
funds.  Local World Bank officials report they have heard 
nothing from Kuwait since the World Bank's West Bank and Gaza 
Director, David Craig, traveled earlier this month to Kuwait 
City to deliver the required paperwork to officials at the 
Kuwait Fund for Development. 
 
 10. (C) The PA is optimistic that the UAE will come through 
with an additional USD 42 million in budget support.  Khalidi 
said the Emirates "are doing very well" and Jadallah said he 
is confident this additional sum will arrive.  In contrast, 
Khalidi reports the PA is not even trying to secure 
additional assistance from Qatar.  "They decided just to pay 
when Hamas is in power," Khalidi said.  "They paid 150 
million dollars to Hamas and nothing since." 
 
Western Donors Keep Squeezing 
----------------------------- 
 
 11. (C) Jadallah said that the PA is working to finalize 
World Bank and EC mechanisms to transfer recent pledges from 
Canada, the UK and Italy.  Though hopeful (and appreciative) 
of these additional contributions, Jadallah made clear that 
they would not add up to much more than USD 60 million, and 
would not solve the PA's current budget woes. 
WALLES