(Agencies)
Updated: 2008-04-27 19:03

The idea was to gradually cut government spending and revive the private sector, which has been hit hard during Israeli-Palestinian fighting and stifling Israeli restrictions on Palestinian trade and movement. This would eventually make the Palestinians less dependent on international aid.

The international community also hoped that an economic recovery would lend support to peace negotiations, which have yielded little tangible progress so far.

However, the bank said that "the private sector revival required for a virtuous cycle of growth has not been realized due to the continued restrictions on movement and access."

The Palestinian reform and development plan is largely implemented in the West Bank, though Gaza does see some of the foreign aid, in the form of salaries paid to thousands of civil servants there.

On Friday, said the Palestinian government in the West Bank has made "significant strides" toward reducing its huge budget deficit of 27 percent of the GDP, but that international donors need to transfer an additional $400 million to close the deficit in 2008. Much of international aid is currently earmarked for development projects, not budget support.

Israeli government spokesman Mark Regev said Israel is working closely with the donor community, and that it is in Israel's interest to see the Palestinian economy recover.

However, he said Palestinian militants continue to pose a threat, and a hasty removal of roadblocks, if followed by attacks on Israel, could set back peace efforts.

"We are ready for calculated risks. We are not ready for irresponsible risks," he said. "We will continue to work with the Palestinians and the international community in taking down roadblocks."

In recent weeks, Israel removed some obstacles to movement in the West Bank, mainly dirt mounds. However, the report, citing UN figures, said in March that the overall number of obstacles had increased.

   1 2   

   1 2