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
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
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
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
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.
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