(MENAFN) The International Monetary Fund (IMF) stated that the economy of the West Bank and Gaza (WBG) deteriorated in 2012 and real gross domestic product (GDP) is expected to contract more this year to 5 percent, reported Emirates 24/7.
The IMF said that the main reason behind the worsening economic condition in WBG is Israel, due to controls on internal movement in the West Bank, the imposed obstacles on exports and imports, in addition to the virtual closure of the Gaza Strip.
The IMF added that the notable decline in foreign aid in 2012, accompanied with a plunge in revenue and expenditure resulted in large accumulating debts, around 6 percent of GDP, to the private sector, the public pension fund, and wages, with bank loans to the Palestinian Authority (PA) growing to USD1.4 billion.
As for 2013, the IMF noted that efforts by the PA to restrain the deficit should be allied with higher donor aid and better economic cooperation with Israel.
Furthermore, the PA's fiscal adjustment should concentrate on expenditure, with extra emergency measures in case of fiscal risks.
It is worth noting that PA's draft budget for the current year targets a deficit of USD1.3 billion, combined with projected donor aid of USD1 billion and payment of wage arrears, implies a financing shortfall of USD0.4 billion.