Israel sought to borrow $100 million from IMF to prevent collapse of Palestinian Authority
Israel recently asked the International Monetary Fund for a bridge loan of a $100 million dollars that it planned to transfer to the Palestinian Authority to help prevent its financial collapse, but the IMF turned down the request.
The PA, which is not a state, cannot ask the IMF for help on its own. The plan therefore, was for Israel to take the loan on the Palestinians’ behalf, have the PA repay the loan to Israel, and Israel would repay the IMF.
The IMF rejected the Israeli request, however, saying it did not want to set a precedent of a state taking a loan on behalf of a non-state entity.
Israel’s approach to the IMF began to take shape during the IMF’s annual conference in Washington in mid-April. PA Prime Minister Salam Fayyad met during the conference with Bank of Israel Governor Stanley Fischer and the two discussed the PA’s serious financial crisis.
According to a senior Israeli official, Fayyad explained to Fischer that the euro crisis in Europe and the financial crisis in the United States made it impossible for Western nations to increase their financial assistance to the PA. At the same time, Arab states were not transferring funds that they had promised, and Palestinian banks were refusing to extend any more credit to the government due to its inability to make debt payments.
This economic squeeze was giving the PA a serious cash-flow problem that was making it hard to pay salaries to government workers, particularly to security personnel. Salaries are being paid late, and many only get half their salaries when they are paid.