THE Palestinian Authority faces a suffocating financial crisis after deep US aid cuts and an Israeli move to withhold tax transfers, sparking fears for the stability of the West Bank.

The authority, headed up President Mahmud Abbas, announced a package of emergency measures on March 10, including halving the salaries of many civil servants.

The United States has cut more than $500 million in Palestinian aid and in the last year, though only a fraction of that went directly to the PA.

The PA has decided to refuse what little US aid remains on offer for fear of civil suits under the new legislation passed by Congress.

Israel has also announced that intends to deduct around $10 million a month in taxes it collects for the PA in a dispute over payments to the families of prisoners in Israeli jails.

In response, Abbas has refused to receive any funds at all, labelling the Israeli reductions theft.  That will leave his government with a monthly shortfall of around $1890 million for the length of the crisis.

The money makes up more than 50% of the PA's monthly revenues, with other funds coming from local taxes and foreign aid.

While the impact of the cuts is still being assessed, analysts fear that it could affect the stability of the occupied West Bank

''If the economic situation remains difficult and the PA is unable to pay salaries and provide services, in addition to continuing [Israeli] settlement expansion it will lead to an explosion,'' political analyst Jihad Harb said. [Agencies]

The latest operational research on the Financial Plight of the Palestinians continues.


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