West Bank and Gaza: Report to the Ad Hoc Liaison Committee

This paper focuses on West Bank and Gaza’s report to the ad hoc liaison committee. The outlook for the Palestinian economy remains dire, with risks tilted to the downside. Achieving higher growth and overcoming the fiscal crisis are intertwined objectives, requiring coordinated efforts from the Palestinian Authority, Israel, and the international donor community. This report elaborates on the transformative fiscal and structural reforms needed to improve the Palestinian living standards over the medium term. The report recommends consolidating the strong fiscal revenue performance and pursues ambitious expenditure reforms in a gradual and socially balanced way, first focused on the wage bill, health system, and net lending. It is also imperative to continue to try to engage the Government of Israel to achieve tangible outcomes to alleviate Israeli-imposed movement, access, and investment restrictions and to resolve the outstanding fiscal files, including Area C taxation. In addition, adopt reforms to further enhance the business climate, advance the digital transformation of the economy, and carry out critical energy infrastructure projects.