1995-Feb-16 Donors

Donor talks this quarter revolved around meeting PA financial needs through 12/31/95 in light of the 3/31 expiration of the donor states' agreement on funding PA expenses. Two formal and two main informal donor meetings were held to this end:

• On 2/28, the second formal meeting of the Local Aid Coordination Committee was held in Jericho. Attendees, incl. PA Planning M Shaath and representatives from the World Bank, UN, PECDAR, and more than 30 donor countries, discussed effects of the continued closure of the o.t., financial needs for the period 4/1-12/31, and replenishing the Holst Peace Fund for PA administrative costs.
• On 3/8-9, an informal meeting of major donor and host governments was held in Amman in order to reassure the PA followmg the World Bank's announcement (3/2) that the Holst fund had run out of money because donor countries have failed to honor their pledges. Participants from 28 countries and organizations reaffirmed their pledges and/or made additional pledges (incl., U.S., $15 m.; Sweden, $2 m.; Britain £8 m). 
• The Ad Hoc Liaison Committee (AHLC) held an informal two-day meeting in Washington 4/3-4. The PA submitted for review its FY 1995 budget for $400 m., showing a $136 m. deficit, and asked for $500 m. to cover the deficit and administrative costs. Donors unofficially agreed to cover PA operating costs through April and to fulfill the remaining $35 m. of the $125 m. in outstanding pledges noted at the 11/30/94 Brussels meeting. They also noted that there were no pledges or remainder of 1995. Following donor meeting, members of Palestinian delegation met with World Bank, IMF, and U.S. Dept. of Commerce officials to discuss possible free trade agreements with U.S. delegations interested in starting joint U.S.-Palestinian development projects in the self-rule areas. 
• On 4/27, the main AHLC meeting was held in Paris to approve the decisions taken at the 4/3-4 Washington meeting. Israel, the PA, and the donor representatives signed an agreement designed to help the PA meet operating costs for the rest of FY 1995 and boost economic development (see Doc. Al). The committee approved the reallocation of only $60 m. to help cover the PA's $136 m. deficit for 1995, meaning the PA could run out of money by the end of 9/95. Donors were also encouraged to finance construction of Gaza harbor and the industrial parks. Israel promised to ease the flow of goods from the o.t. into Israel, pledged an extra $6.5 m. toward PA operating costs, and promised to turn over millions of shekels in tax money it has collected on the PA's behalf. 
• On 3/24, VP Al Gore announced a $73 m. aid package from USAID to improve Gaza's sewage system, pave streets, and create jobs. He also announced the authorization for Palestinians to export 4,600 agricultural and industrial goods to the U.S. duty free, to stimulate trade with and investment in the self-rule areas.

Additional pledges to the PA this quarter included:

• $50 m. from the Islamic Development Bank for agricultural projects.
• $27 m. from Saudi Arabia (given directly to the PA) for running Waqf schools and building 10,000 housing units in East Jerusalem.
• $19 m. from Italy, Kuwait, Norway, and the U.S. to cover salaries of PA civil servants.
• $7.5 m. from Saudi Arabia to cover police salaries for February and March.
• $5 m. from Japan for job creation.
• $4 m. from Kuwait to cover the PA deficit.