Sunday, March 11, 2007

RAMALLAH, West Bank — Large sums of aid to the Palestinian government have gone unaccounted for in the year since Hamas took over because financial oversight has disintegrated, said a former World Bank official who is poised to begin a second stint as Palestinian finance minister.

Salam Fayyad, an independent member of parliament, told The Washington Times that aid to the Palestinian Authority increased last year in spite of the widespread impression that an international aid boycott had squeezed Palestinian coffers dry.

Most of that assistance was channeled through the office President Mahmoud Abbas, but no one can say whether the money reached its destination, Mr. Fayyad said during an interview in his Ramallah office.

“Please write this: No one can give donors that assurance,” Mr. Fayyad said. “Why? Because the system is in a state of total disrepair.”

Five years ago, Mr. Fayyad was drafted to make order out of Palestinian Authority finances under Yasser Arafat. Now, as he prepares to return to the post in a new unity government, he faces an unraveling of his accounting reforms, a ballooning wage bill, a yawning budget shortfall and, most likely, a continued aid boycott.

The banker was the consensus choice of Hamas and Fatah in their February power-sharing agreement that stopped a Palestinian civil war. Outside of Mr. Fayyad’s office is a small detail of Mr. Abbas’ Presidential Guard because guns were fired at the office earlier this year.

“I’m not comfortable with security guards,” he said. “It takes away your spontaneity.”

The World Bank on Saturday published a 197-page report warning the Palestinians to get control of salaries that account for two-thirds of day-to-day expenses, and of a “dire” budget deficit of $110 million a month.

The report cited estimates by the International Monetary Fund that foreign aid to the Palestinian Authority doubled to $700 million in 2006 from the previous year. Total foreign assistance to all Palestinian groups — which includes aid distributed by private organizations — increased last year to $1.2 billion from $1 billion.

Most of the money has been provided by Arab states and members of the European Union, and it was slated for salary and welfare payments, a spokesman said. But because it has been diverted from the Hamas-controlled Finance Ministry, the money has been dispersed among different recipients with no way to monitor how it is getting spent.

Although some of the money went for employee salaries, welfare stipends and fuel bills, it also has been directed to recipients who don’t appear on the Palestinian budget ledger. Much of the aid has passed though Mr. Abbas’ office.

“Where is the control in all of this?” asked Mr. Fayyad, a former World Bank executive who lived in the United States for 20 years. “It’s gone. Where is all of the transparency in all of this? It’s gone.”

Mr. Fayyad, dressed in a conservative gray suit and blue tie, said he won’t know the depth of the crisis or how to fix it until he assumes office. Once he is able to re-establish the finance ministry as the central clearinghouse for foreign aid, the Palestinians will need an injection of aid to keep the government running, he said.

Mr. Fayyad said it will take weeks to re-establish control over donor money and months to come up with a plan to rein in the salary crisis.

Once that is done, he said, money won’t be accepted through any channel except the Finance Ministry.

“You’ll never hear me say, ‘I don’t care how we get the money from as long as we get it.’ I do care as to how we get the money.”

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