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Monetary chief: PA bank borrowing reaches limit

June 11, 2012 1:13 P.M. (Updated: June 12, 2012 6:56 P.M.)
RAMALLAH (Ma'an) -- The head of the Palestine Monetary Authority said Sunday that the Palestinian Authority government has reached the maximum limit of borrowing from Palestinian banks.

Jihad Al-Wazir said in a statement that banks in Palestine increased lending to the government by over $300 million in the last two months, and cannot lend more unless repayments from donor countries come through.

The Authority has set supervisory measures to bolster the banking sector in the face of any political or economic shocks, al-Wazir added.

They maintain a financial leverage ratio of 12 percent, higher than many European banks and put aside 15 percent of profits into a special account, Wazir said earlier.

PA Prime Minister Salam Fayyad said in January that his government owes $1.1 billion in bank loans, as well as $400 million in unpaid revenues to private sector contractors.

Fayyad has tried to embark on a number of austerity measures on government spending and reform of the tax system.

The IMF says the aid-dependent Palestinian economy has entered a "difficult phase" with a severe liquidity crunch worsening since last year due to a drop in aid from Western backers and wealthy Gulf states and Israeli restrictions on trade.
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