MAS discusses “Government Expenditure Reduction Strategies: Available Policies for the Government for Fiscal Consolidation" - Press Release
Ramallah, 21 June 2023: The Palestine Economic Policy Research Institute (MAS) hosted a roundtable discussion around “Reducing Government Expenditures: Available Policies for the Government." The event gathered a group of experts, professionals and stakeholders, both physically at the institute's headquarters and virtually via Zoom. The background paper was prepared by the institute's researcher, Misyef Jamil. Mr. Samir Hulileh, an economic expert, and Dr. Tarek Ashour from Birzeit University presented their insightful contributions and comments on the discussion paper.
The session commenced with the Director of Research at the institute, emphasizing the significance of the topic. Noting that this paper aligns with the institute's commitment to monitoring emerging economic and social issues. The institute regularly hosts roundtable discussions to delve into such topics, considering these discussions essential tools for proposing policy recommendations that positively impact the Palestinian economy and its citizens. The Director expressed gratitude to the Heinrich Böll Foundation - Palestine and Jordan for their support in facilitating this meeting
MAS Background Paper:
While presenting the paper, Jamil highlighted that this session delves specifically into the aspect of expenditures and the chronic challenges confronting the Palestinian general budget. These challenges revolve around three key issues: the dilemma of increasing salary bill, the net borrowing bill, and the bills of the Palestinian Ministry of Health, especially transfers to Israeli hospitals. Within this context, Misyef considered the chronic challenges, where the occupation constitutes a major factor escalating the expenditure inflation due to the inability of revenues to adequately cover these expenditures. Among these challenges are financial sustainability, deductions from clearance funds, leading to actual expenditures surpassing planned ones, thus increasing the pace of public debt, arrears, and widening the budgetary financial gap. Additionally, there has been a significant decline in external budget support, typically funding developmental and social expenditures. This shortfall has resulted in a substantial gap in funding for social aspects and a weakening of funding for developmental projects.
Jamil also addressed solutions and practical policies to mitigate expenditure inflation, emphasizing the significance of commitment to the financial reforms outlined in the budget discourse at all stages. Additionally, stressing the need to address net borrowing through modern and innovative approaches, through the establishment of a specialized unit to monitor this issue in collaboration between the Ministry of Finance and the Ministry of Local Government. Regarding health expenditures and transfers, the paper highlighted the need of a comprehensive restructuring of the health system and management by moving towards mandatory insurance or increasing health fees for affluent groups to enhance the revenue of the Ministry of Health for better service provision.
In the opening of his intervention, Mr. Samir Hulileh, pointed out the government's share of GDP expenditures, highlighting its elevation in comparison to neighboring countries. He emphasized the low share of spending on vital sectors such as education as a percentage of GDP compared to other countries. Mr. Halileh recommended a comprehensive study to analyze the reality of the local public sector, advocating for comparative assessments with other countries in key financial indicators. He further suggested the need of a comprehensive governmental reform plan, requiring genuine government conviction and concrete steps. This reform also demands active collaboration with the local community and the private sector.
Dr. Tarek Ashour, underscored the importance of the government's commitment to expenditure rationalization steps. He emphasized the significance by presenting an analysis of key budget expenditure items, revealing several questionable allocations that significantly contradict government reform plans. Dr. Ashour stressed the importance of net borrowing at the municipal level for their sustainability amid financial challenges, especially when the government fails to meet its financial commitments. He proposed various recommendations for expenditure reduction, particularly in the health and education sectors, focusing primarily on the increased role of the private sector in these domains. Dr. Ashour also emphasized the need to reform the existing tax system, reconsider taxes imposed on companies, and address tax evasion. He asserted in conclusion that investing in strategic projects such as energy, water, and electricity will reduce the expenditure associated with them.
The attendees underscored the importance and necessity of reducing government expenditures. The comparisons of the percentage of expenditures in Palestine as a share of GDP with other countries raised questions among the attendees. Whether the current issue is related to external factors such as the occupation or poor expenditure management and distribution. The discussion highlighted concerns that expenditures do not necessarily go to pivotal and crucial sectors for the development process.
