Palestinians struggle without paychecks

GAZA CITY, Gaza — Ashraf Manama, a Palestinian police officer, doesn't have money to pay his phone bill, so the telephone company last week cut off his service.

His wife, Rana, a high-school English teacher, is buying only food and necessities for their four children. His father, Abdullah, a school headmaster, wonders where he'll find the $150 needed to pay for gas and insurance on the family sedan, or the money for a daughter's college tuition.

And things could get worse if the Manama family's primary employer, the Palestinian Authority, does not quickly solve its financial problems.

Starved for money and increasingly isolated by Israel and the international community since the victory by Hamas in parliamentary elections, the Palestinian Authority is teetering on financial collapse, struggling to meet basic commitments, from supplying electricity to paying salaries.

The Authority is more than a week late paying wages owed to its 150,000 employees. Six of those workers — two police officers, a teacher, a high-school headmaster, a biologist for the Ministry of Agriculture and a social worker in the Ministry of Social Affairs — are members of the Manama family.

Together, they have income of about $3,000 a month, money that keeps four generations of their family — 32 people — fed, clothed and educated, and comfortably in the middle class compared to their neighbors. But with Hamas in control and donors threatening to reduce aid, the Manamas are afraid that the Palestinian Authority's financial crisis will become their own.

The Authority suffered a serious blow this month when Israel decided to suspend its monthly transfer of about $55 million in tax revenues, money it collects on the Authority's behalf on imports and from Palestinian businesses and laborers working in Israel. Israel, which considers Hamas a terrorist organization, has vowed not to have any contact with a Hamas-run government.

The budget shortfall has made it impossible for the authority to pay its $115 million payroll, leaving Palestinian leaders scrambling to restructure loans and seek international assistance.

Jihad al-Wazir, acting finance minister for the Authority, expects to collect enough money by mid-March to pay the salaries that were due March 1, but the same problem will return again next month, he says. Even before Israel withheld the tax revenues, the authority faced a deficit of about $1 billion in 2006.

"We are playing the credit-card game till all the credit cards are maxed out, which is where we've got this month," al-Wazir says.

The effects are being felt in both the West Bank and Gaza, but in Gaza, where there are few private industries and the Palestinian Authority is the largest employer, the sting from a delay in paying salaries is already felt.

Ali Badwan, an economic consultant in Gaza, says that the Palestinian Authority accounts for more than one-third of the Gaza economy. When paychecks don't arrive, business screeches to a halt.

Adding to Gaza's woes, Israel has kept closed the main crossing point for cargo entering or leaving Gaza for Israel for most of the past two months, citing security concerns. Gaza's fruit and vegetable farmers, unable to export crops, have lost thousands of dollars in business.

Six months ago, there was optimism. Israel had evacuated all Jewish settlements in Gaza and withdrawn its troops. The number of clashes between Palestinians and Israel dropped nearly to zero. All those developments promised to open the door for a new era of progress.

But Hamas' surprising victory damaged confidence.

"People felt we were getting into a new era and they would prosper," Badwan says. "But all of a sudden it crumbled like a sand castle on a beach."