Gaza liquidity crisis having tangible humanitarian impact

A banking and liquidity crisis is affecting the lives of Palestinians in the Gaza Strip: Civil servants are struggling to get their salaries, and humanitarian aid is being delayed. Thousands of welfare benefit recipients are not getting their dues. This week Israel allowed the transfer of 50 million new Israeli shekels (NIS - equivalent to US$12.7 million) to Gaza towards the payment of 65,000 employees of the Ramallah (West Bank)-based Palestinian Authority (PA) who live in Gaza, according to the UN Office for the Coordination of Humanitarian Affairs (OCHA). Since the Hamas takeover of Gaza in June 2007, the flow of cash into Gaza has been restricted to infrequent shipments of NIS 50-100 million. The restrictions have left banks in Gaza without sufficient cash to allow PA staff to withdraw their salaries. The lack of cash has impeded basic financial transactions and aid programmes, OCHA said. It has also led to cash hoarding. "Our main operations in Gaza are cash-based. We assist the PA in Ramallah to pay salaries and pensions and the European Commission [EC] pays support to vulnerable families via their bank accounts, but there is not enough physical cash in the banks to allow the payments to be made," EC representative Christian Berger, based in Jerusalem, told IRIN. The EC, the largest donor to the Palestinians, contributes US$33.4 million to the monthly PA salary bill, about half the requirements. It also pays about US$250 to 48,000 social hardship cases every three months, about half of them in Gaza. Gaza families received their March payment in May but the EC is unsure if there will be enough cash for the June payment. "The banking system in Gaza is on the verge of collapse because there is not enough physical cash," the EC's Berger said. "Our projects cannot receive the necessary cash." Israel agreed to allow NIS 50 million to enter per month, but Gaza requires a minimum of NIS 100 million per month, said Berger. "Cash enters [Gaza] usually once per month via the Erez crossing for PA employees from Ramallah," Israeli Defence Ministry spokesperson Shlomo Dror told IRIN. "We let money enter for international organisations and UN agencies if we know exactly where it is going; otherwise we can't be sure that cash entering Gaza does not go into the hands of Hamas." When Hamas took over in Gaza, Israeli banks decided not to have a relationship with Gaza banks, because Hamas is considered a "terrorist organisation", said Dror. "If Hamas acts like a terror organisation, we [Israel] will not assist or coordinate with their government," said Dror. The Hamas government has assumed financial responsibility for the public school system, civil defence, public hospitals and 54 primary healthcare clinics in Gaza. UNDP programme affected "We are also facing this liquidity issue. The UN Development Programme [UNDP] is implementing a payment system for non-refugees whose homes were damaged or destroyed during Israel's last military operation," said UNDP programme officer Husam Toubil in Gaza. "We have dispersed US$20 million in cash assistance and need to disperse US$6.3 million more, but there is a delay because the banks do not have enough cash," he said. Ahmed Abbo, a 23-year-old nursing student, lost his home in East Jabalyia during the Israeli offensive (27 December 2008 - 18 January 2009). He said those who used to live in his block of flats were waiting for $US5,000 from UNDP to rebuild each home but that the overall rebuilding cost for the eight flats was at least $250,000. Some 13,300 households are registered with UNDP as recipients, and about 4,300 are still waiting to receive the funds to find alternative shelter or to repair their homes. Ahmed Al-Sutan, 59, a former labourer in Israel, and his wife Sabah, are waiting for $5,000 from UNDP to rent an apartment for their family of 12 after their home in Jabalyia was destroyed during the offensive. "My family now lives in a one-bedroom, one-bath house in Jabalyia," said Ahmed Al-Sultan. "One month ago I was supposed to receive the funds, but they have been delayed." UNRWA scheme affected The same scheme is being implemented for refuges in Gaza by the UN Relief and Works Agency (UNRWA). "UNRWA is in the process of distributing cash for refuges with damaged and destroyed homes," said UNRWA spokesperson in Gaza Adnan Abu-Hasna. "We have dispersed $5million, and we want to disperse $20 million more but we are struggling due to the lack of cash." UNRWA is also having difficulty getting cash into Gaza to allow it to make payments to social hardship cases, mainly for food. The last payment for the 96,000 refugees registered as social hardship cases was delayed nearly four months, while 25 percent of the 96,000 have yet to be paid anything, Abu-Hasna said. Some 1,075,000 Palestinians are registered refugees in Gaza, according to UNRWA. About 1.5 million Palestinians live in the 356sqkm territory. Black market The EC and UN agencies in Gaza are concerned that the lack of cash is eroding the transparency of the Palestinian banking system and creating an unhealthy black market. Tunnels along the Gaza-Egypt border are used to import cash, according to OCHA in Gaza. Almost all imports to Gaza are paid for in cash due to the lack of links between banks in Gaza and banks in Israel, according to the governor of the Palestinian Monetary Authority (PMA) in Ramallah, Jihad Al-Wazir. This was leading to price fixing and unregulated transactions, he said. New bank opens The National Islamic Bank (NIB) opened three weeks ago in Gaza City. "We only do local business. We did not get a license from the PMA due to the political divide," said manager Hazem Housni. "The Gaza government has more than 25,000 employees and other banks are denying them services." NIB hopes to reduce the effects of the cash crisis by collecting money from Gaza customers and re-investing the funds in Gaza to re-circulate the cash.