RAMALLAH â€” The resignation of much-admired Palestinian Finance Minister Salam Fayyad will deliver a major blow to efforts to attract investment and highlight the limitations of a reform drive, analysts said Sunday.
Fayyad has submitted his resignation, it emerged over the weekend, in a move that sources said was the result of his anger and frustration about increases in spending made by Prime Minister Ahmed Qureia without his approval.
The government has so far not accepted his resignation and negotiations are understood to be still ongoing in a bid to get him to change his mind.
A technocrat and former International Monetary Fund (IMF) official who is well-liked by the United States, Fayyad has spearheaded a drive towards greater transparency in a bid to clean-up Palestinian finances and clamp down on corruption since his appointment in 2002.
His efforts have helped persuade international donors to increasingly channel money directly towards the Palestinian Authority (PA), rather than via NGOs, but it has also brought him into conflict with the politically astute Qureia.
Azmi Shuabi, the head of the parliament’s economic committee, said Fayyad was furious that Qureia had ensured that $350 million was continuing to be channelled towards the 60,000 people employed by the security services.
“We don’t know if 10-15,000 of these people are even still working or not,” Shuabi told AFP.
“Fayyad is insisting that only those who are working be paid, and he wants to increase the salaries of the civilians who are employed in the public sector.”
A report recently compiled by the World Bank, while praising Fayyad, said the Palestinian economy faced major structural problems.
“The PA has created a serious fiscal crisis for itself with salary expenditure essentially out of control,” it said.
“In spite of the efforts of the finance minister to maintain discipline, the PLC [parliament] and Cabinet have shown little appreciation of the need for restraint, and have given into pressure by various groups in the security and civil service.”
Nigel Roberts, head of the World Bank’s mission in the region, told AFP the Palestinians had to either start reducing salaries or the government payroll to attract investment and the largesse of the donor community â€” a fact that Fayad but few others appreciated.
“He was a very courageous and efficient minister of finance but he did not get all the support necessary to restrain the expenditure from the PLC and the government,” he said. “Nobody is irreplaceable. The problem is the policy.”
Nadr Ezat, an economics expert from the West Bank’s Bir Zeit University, agreed that Fayyad’s departure would serve to undermine confidence.
“Salam Fayyad has been the symbol of a new Palestinian system of financial reform,” said Ezat.
“He is a technocrat, a professional and if he resigns it will be very difficult for the Palestinian Authority to find an alternative to him.
“It will be a big loss for the PA as it will have an impact on attracting investment from outside.”Contacted by AFP, Fayyad declined to comment on the reason behind his resignation.
A member of his office said the decision was made as Fayyad was considering running for parliament in January.
The government must stand down later this month at the start of campaigning for the January 25 legislative elections but it was expected that ministers would resign en masse.
Fayyad is not currently an MP nor a member of the mainstream Fateh faction. A source close to Qureia scoffed at the suggestion that the minister had submitted his resignation to run for parliament.
“He is not expected to be a candidate. It’s all a smokescreen,” he said.
A member of the parliament’s budget committee said intensive negotiations were still under way in a bid to persuade Fayyad to change his mind.
“We hope that we can solve this problem within 48 hours,” said the MP, speaking on condition of anonymity.