An Economic Snapshot of Palestine and the PRDP

MIFTAH Study - November 30, 2009 - Back to Resources Page [1]

What is the Palestinian Reform and Development Plan 2008?2010 (PRDP)?

The PRDP was developed to help reverse the injurious cycle the Palestinian economy finds itself
in today. Further details of how we came to be in this cycle are included below. The PRDP aims
to reduce and control Palestinian National Authority (PA) government expenditure in order to
redirect funds to infrastructure and development projects, with a view to bolstering private
sector growth and investment. The PA government does not want the economy to continue to
depend on the government for support. Hence, the PRDP contains difficult but arguably
necessary steps to turn our economic situation around. Unfortunately some of those steps will
hurt in the short term.

Since the tragic events of 2000 and the beginning of the Second Intifada, the Palestinian
economy has descended into a severe downward cycle. Israel imposed curfews and closures on
Palestinian towns and villages, rendering the movement of goods and people very difficult if not
impossible. As instability and violence in the Territories increased, private sector growth came to
a standstill and began to shrink, forcing a rapidly growing labor force to look to the public sector
for employment. The public sector, i.e. the Palestinian government, began directing funds
towards the hiring of employees, as well as increasing government subsidies, which at the time
was necessary to prevent an economic catastrophe from occurring. As such, many families came
to rely on the Palestinian government for their livelihood. Consequently, there was little money
remaining to invest in much needed public infrastructure and development projects. In fact,
most such projects ceased. This situation continued unabated, and so we find ourselves in the
condition we are in today: not enough private investment, very little investment in
infrastructure, negative economic growth rates, high unemployment figures, and a people who
are heavily reliant on the government for survival (an average of 5.3 people were dependent on
a government employee in 2007). The Palestinian government in turn is now almost completely
reliant on donor funding to survive, using those funds to pay salaries and cover daily operating
costs.

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MIFTAH Study - November 30, 2009 - Back to Resources Page [1]