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World Bank calls on Israel to ease up on Palestinian economy

[TEL AVIV] The World Bank called on Israel to relax restrictions on imports to the Palestinian territories that can have both civilian and military applications, saying such limits are harming the Palestinian economy.

The current system "limits economic diversification and sustainable growth in the Palestinian territories," said Anna Bjerde, the World Bank's acting country director for West Bank and Gaza and director of strategy and operations for the Middle East and North Africa. "A revamp of the application of the restrictions on dual-use goods is critically needed."

The report, issued Wednesday, will be presented to donors to the Palestinians who are set to meet April 30 in Brussels. The Palestinian economy saw "no real growth" last year, with Gaza's economy contracting by some 7 per cent last year and the West Bank also underperforming, the bank said.

Israel says the limits are needed to prevent materials from being diverted to build weapons or other terrorist infrastructure. Easing dual-use restrictions could bring additional 6 per cent growth to the West Bank economy and 11 per cent in Gaza by 2025, according to the report.

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The World Bank expressed concern about the standoff over tax revenues that Israel collects on behalf of the Palestinian Authority. Israel recently deducted US$138 million from this money to offset what the Palestinian government pays to security prisoners in Israeli jails or the families of Palestinians killed while attacking Israelis.

In response, the Palestinian Authority declined to accept the rest of the tax money, cutting civil service salaries while keeping the "martyr" payments intact.

The Palestinian economy "is now facing a severe fiscal shock" because of the impasse over the martyr payments.

"If not resolved, the standoff will increase the financing gap from US$400 million in 2018 to over US$1 billion in 2019," the report said.