Unintended Consequences of Foreign Aid to the Palestinians

The Summer 2008 edition of the Middle East Quarterly carries a piece by CAMERA analyst Steve Stotsky exploring the data correlation between foreign aid to the Palestinians and  homicides from 2001 to 2007.   “Does Foreign Aid Fuel Palestinian Violence,”  compares  official data on foreign aid to the Palestinian Authority with annual tallies of homicides committed by Palestinian militants.   

The piece discusses how the outbreak of Palestinian violence in September 2000 and the Israeli reaction to this violence led to a sharp decline in revenue to the Palestinian Authority. Foreign donors responded to this fiscal crisis by increasing the overall level of donations to the Palestinians and in particular by increasing funding of the Palestinian Authority government at the expense of development projects.

It is postulated that this inadvertently had two major negative implications. First, the infusion of foreign aid meant that Palestinian Authority was no longer dependent upon tax revenue, so Palestinian leaders had less incentive to restore the societal calm and stability necessary for generating a favorable commercial environment that would then translate to increased tax revenue. Second, the increased funds provided more opportunity to divert money to militants and terrorist groups.

The Paris conference in December, 2007 promised unprecedented levels of foreign aid  to the Palestinian Authority in the West Bank. It remains to be seen whether the current government will effectively use the funds to improve conditions in the West Bank and Gaza by promoting a calmer and more stable environment. 

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