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PA austerity measures 'will not solve budget crisis'

March 6, 2012 4:59 A.M. (Updated: March 11, 2012 10:29 A.M.)
BETHLEHEM (Ma'an) -- PA Prime Minister Salam Fayyad's recently introduced austerity measures will not make a serious impact on the public budget deficit, a finance ministry official warned Monday.

Last week, the Ramallah-based cabinet agreed a series of cost-cutting measures on government expenses, including limiting travel to economy class and freezing purchase or rent of buildings for government purposes.

The measures also ended payment for government employees to take training courses, reduced the budget for contractors by 30 percent, and limited contracts to a monthly fee of $4,000.

Fayyad had faced public outcry when he proposed sweeping tax rises in earlier efforts to reduce the $1.1 billion deficit in the public budget.

After launching a "public dialogue" with businesses who had warned the tax rise could have a counter-productive impact on the economy, Fayyad agreed to lower the proposed rate.

Undersecretary of the Ministry of Finance Muna al-Masri warned that the austerity measures would have scant effect on the huge shortfall in public accounts.

However, PA spokesman Ghassan al-Khatib said the measures went beyond simply increasing government revenues.

"The austerity measures have three benefits: they save money, they spur reform and they prove that austerity is applied first on officials and ministries," al-Khatib said.
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