- Milan Zavadjil
- Published Date:
- February 1997
The PA has been building—with the assistance of donors—an infrastructure to provide prompt and reliable economic statistics. As outlined by the Master Plan for Palestine Official Statistics of the Palestine Bureau of Statistics (PBS), many institutions have had to be established from scratch, and initial surveys have had to be conducted to provide a secure base of source data for some sectors. Below is a status report on progress in developing macroeconomic statistics and how the major aggregates are currently derived.
Production, Prices, and Employment
In late 1994, responsibility for the collection of data on national income accounts and on the Consumer Price Index (CPI) was transferred from the Israeli Central Bureau of Statistics (ICBS) to the Palestinian Central Bureau of Statistics (PCBS) and the Ministry of Planning’s Department of Central Statistics (DCS). Although work on producing comprehensive national income accounts is proceeding at the PCBS, data are not available for 1995 and 1996. The estimates presented earlier in this report therefore rely on sectoral employment data to estimate real GDP growth for those two years (see Appendix Table 14). In the absence of large increases in the aggregate capital stock since 1993, and assuming a standard constant returns to scale production function, the rate of growth of output in 1995 and 1996 was approximated by the product of the rate of growth of labor in particular sectors in those years and the elasticity of output with respect to labor in 1993–94.
As regards expenditures, public investment and consumption, and imports and exports of goods and nonfactor services were obtained from the budget and balance of payments estimates, respectively, as discussed below. Changes in private investment are estimated on the basis of changes in private imports of construction materials and capital goods. With GDP on the production side estimated using the method described above, private consumption was then obtained as a residual.
As regards the CPI, the PCBS has been collecting CPI data for the WBGS since November 1995. For the period January-November 1995, CPI data are available only for the Gaza Strip (from the DCS). For 1995, the CPI data for the WBGS were estimated on the basis of the CPI data for the Gaza Strip, with changes in the CPI in the West Bank taken as approximately equal to those in the Gaza Strip.
The Ministry of Finance regularly provides, with a lag of 6–8 weeks, fiscal data on the PA’s monthly budgetary operations to the staff. The overall coverage is uneven. On the revenue side, the coverage is good with fairly comprehensive monthly domestic revenue data conveyed in a timely manner. These are supplemented by the monthly revenue clearance data, provided by the Israeli authorities, also on a timely basis. On the expenditure side, however, only a skeletal breakdown of monthly expenditures is available and data on expenditures from accounts not under the control of the Ministry of Finance are not available. Capital expenditures are also not provided and are estimated on the basis of reports of donors. In addition, no information on budgetary domestic financing is usually provided.
Since early 1994 and prior to January 1996, selected balance sheet items were collected by the Palestine Economic Policy Research Institute. Starting in January 1996, the PMA has been receiving on a monthly basis the balance sheets of the non-Israeli commercial banks in the WBGS, which are then consolidated by PMA and IMF staff. Monetary data are generally satisfactory, though one significant shortcoming is the incompleteness of the data covering claims on government and government deposits of the Bank of Palestine. The balance sheet of the PMA has also become available recently.
Balance of Payments
As presently compiled, the balance of payments estimates for the WBGS are based on limited data and are heavily dependent on past data relations and/or assumptions. Moreover, information on balance of payments developments appears to be deteriorating steadily because the Israeli authorities, who used to assemble complete balance of payments estimates for WBGS, are at present confining gathering data on the WBGS only to very aggregate data needed for the Israeli balance of payments,19 while the PA is presently collecting only trade data for the Gaza Strip. Under these circumstances, considerable care is required in making balance of payments assessments for the WBGS, which is underlined by some recent changes in estimating some aggregates, as noted below. Individual balance of payments categories are estimated as follows:
(i) Exports. For the Gaza Strip, the DCS of the Ministry of Planning and International Cooperation (MOPIC) assembles export and import data on a quarterly basis (exports to Israel, the West Bank, and other countries are published separately). For the West Bank, there are no Palestinian sources of data, so that the ICBS aggregated data on Israeli imports from the WBGS has to be the basis of the estimates.20 In late 1996, the ICBS revised upward its series on imports from the WBGS on the basis of VAT claims on the WBGS.21 Using information on the West Bank’s exports to Israel and the ICBS’ past data on West Bank’s trade with the rest of the world, estimates of total exports of the West Bank are derived.22
(ii) Imports. For the Gaza Strip, as indicated above, the Palestinian DCS is compiling quarterly data.23 The situation for imports of West Bank is the same as described above for exports, including the utilization by ICBS of the WBGS’ VAT claims on Israel for estimating imports of the WBGS from Israel. The Israeli ICBS is the only source of data for the West Bank and this data is only for the West Bank’s imports from Israel. Estimates for total imports of the WBGS are made as described above for exports, but also taking into account possible imports related to the public investment program.
(iii) Remittances. The ICBS is the only source of information for gross receipts and payments relating to remittances. Beginning in 1994, ICBS stopped compiling data for the WBGS on the respective regions’ gross service transactions with the rest of the world; the ICBS’ current estimates are confined only to Israel’s service transactions with the WBGS. This data, on occasion, is broken down into wages and other services. In estimating the WBGS’ remittances, the current and past data provided by the ICBS on this series, as well as data provided by both Israeli and Palestinian sources on the number of Palestinians working in Israel, are used.24
(iv) Nonfactor services. Estimates for these items are made taking into account the relation of the WBGS’ nonfactor service receipts from and payments to Israel to past data on the WBGS’ nonfactor transactions with the rest of the world.25
(v) Unrequited transfers and capital transactions. The information on public unrequited transfers relating to UNRWA and Emergency Assistance Program (EAP) and capital account public loan transactions (see Table 9) are derived to a large extent from the Matrix of Donors’ Assistance put together by the Secretariat of the AHLC.26 The matrix incorporates information provided by the WBGS’ donors to the World Bank and presents information on donors’ pledges, commitments, and disbursements (to implementing agencies) for various types of activities, i.e., investment, technical assistance, and transitional support activities. The only information on private unrequited transfers is that provided until 1993 by the ICBS on transfers through nongovernmental organizations.
(vi) Net foreign assets of commercial banks. Estimates for the commercial banks’ net foreign assets are derived from information provided by the PMA.
As can be discerned from the above description of balance of payments items for which some data are available, there is almost no information on private unrequited transfers and private capital transactions. Similarly, no information is available on net private investment income; estimates of public interest payments are imputed from information provided by donors on loan disbursements. The balance of payments estimates for the WBGS are closed by assuming that the bulk of net errors and omissions are the result of private capital inflows and unrequited transfers.
The World Bank has been deeply involved in the WBGS in recent years, and is currently a primary donor of funds, with disbursements of about one-fourth of total donor assistance since the signing of the Oslo agreements in 1993. The Bank’s current activities fall in three categories: (i) technical and advisory services and trust fund administration, in which the Bank administers the transfer of donor contributions to the WBGS; (ii) the financing of investment projects; and (iii) the coordination of donor activities.
In the first area, the Bank’s main activities are the administration of the Johan Jorgen Hoist Peace Fund and the Technical Assistance Trust Fund (TATF) on behalf of donors. The Hoist Fund has been an important instrument for channeling donor support to the PA’s recurrent budget and start-up activities. More recently, it has also served as a key funding instrument for employment generation activities designed to partially compensate for the adverse effects of border closures. Twenty-five donor countries have, by the beginning of December 1996, pledged a total of about US$260 million to the Hoist Fund, of which about US$227 million has been paid; of the latter amount, about US$217 million has been disbursed. The TATF is funded by twelve donors and supports such activities as economic and sector policy studies, advisory services, and project preparation work. Donors have pledged a total of US$23 million to the Fund, virtually all of which has been committed to specific works.
The Bank’s second area of activity is the financing of investment projects through the Trust Fund for Gaza and the West Bank (TFGWB). A part of IBRD profits are transferred to the TFGWB, then lent to the PA for project financing on standard International Development Association (IDA) terms. The Bank has already provided US$140 million to the fund, of which US$140 million has been committed to the following six investment projects: (i) the Emergency Rehabilitation Project (ERP), whose primary aim is to rehabilitate roads, water and wastewater infrastructure, and schools; (ii) the Education and Health Rehabilitation Project, which is designed to rehabilitate school and health facilities; (iii) the Second Emergency Rehabilitation Project, which in addition to the objectives of the first ERP, seeks to accommodate small-scale labor-intensive works; (iv) the Municipal Infrastructure Development Project which aims to rehabilitate community infrastructure in selected municipalities; (v) the Gaza Water and Sanitation Services Project which establishes private sector management of water and waste under services; and (vi) the Microenterprise Project which initiates a program to finance microenterprises through the banking system.
As regards donor coordination, the World Bank chairs the Consultative Group (CG) meetings and acts as Secretariat of the AHLC. In the latter capacity, it has responsibility for tracking donor pledges, commitments, and disbursements to the PA; it produces regular editions of the “Matrix of Donors’ Assistance to the West Bank and Gaza.”
Over the next two years, Bank assistance will continue to focus on the improvement of basic infrastructure and social services, and to help in the creation of an environment conducive to private sector development. The following key projects, which are under various stages of preparation, are included in the Bank’s program: (i) a Community Employment Project; (ii) a Nongovernmental Organizations Project; (iii) a Housing and Housing Finance Project; (iv) an Industrial Estate Development Project; (v) an Electricity Distribution and Management Project; (vi) an Investment Guarantee Fund (with MIGA); (vii) a Palestinian Expatriate Professional Program; (viii) a Legal Development Project; and (ix) an Agriculture Sector Project. In addition, preparatory work has begun on a financial sector development project, whose aim is to help in the development of the institutional and regulatory framework for more efficient financial intermediation.
|In the West Bank and Gaza Strip||316||329||342||336|
|Unemployment rate (in percent)||18||25||29||34|
|Imports of goods and nonfactor services||3,773||3,740||5,746||5,548|
|Exports of goods and nonfactor services||693||938||1,425||1,312|
|Gross domestic expenditure||10,316||12,066||14,023||14,520|
|Gross fixed investment||1,874||1,844||1,792||1,913|
|Net factor income||1,562||1,162||745||649|
|Net investment income||--||–1||–2||--|
|Gross domestic savings||–1,313||–958||–2,529||–2,322|
|Gross national savings||249||204||–1,784||–1,673|
|(As a percent of GDP)|
|Imports of goods and nonfactor services||52.1||40.4||59.2||53.9|
|Exports of goods and nonfactor services||9.6||10.1||14.7||12.8|
|Gross domestic expenditure||142.6||130.3||144.5||141.2|
|Gross fixed investment||25.9||19.9||18.5||18.6|
|Net factor income||21.6||12.5||7.7||6.3|
|Net investment income||--||--||--||--|
|Gross domestic savings||–18.2||–10.3||–26.1||–22.6|
|Gross national savings||3.4||2.2||–18.4||–16.3|
|Imports of goods and nonfactor services||1,333||1,242||1,908||1,745|
|Exports of goods and nonfactor services||245||312||473||413|
|Gross domestic expenditure||3,645||4,007||4,657||4,565|
|Gross fixed investment||662||613||595||601|
|Net factor income||552||386||248||204|
|Net investment income||--||--||–1||--|
|West Bank||Gaza Strip||Total|
|Agriculture and fisheries||19||11||17|
|Mining, quarrying, and industry||18||16||17|
|Services and other||26||43||30|
The ICBS compiled full balance of payments estimates for the Gaza Area and Judea and Samaria (West Bank) until 1987. (For further details, see the ICBS publication, National Accounts of Judea, Samaria and the Gaza Area, 1968–1993) After 1987, the coverage of balance of payments for WBGS steadily deteriorated. In the early 1990s, coverage was confined to current account transactions.
Recently, ICBS has been providing the data only in aggregate form, without a breakdown of trade into West Bank and the Gaza Strip.
This method of estimating imports was applied to 1995 and 1996 data.
The ICBS compiled data on the West Bank’s exports to the rest of the world, as well as to Israel, through 1994. For the Gaza Strip, the series on total exports to the rest of the world was discontinued in 1994. The same compilation procedures were affected by the ICBS with respect to the WBGS’ imports.
This data excludes on occasion certain imports such as vehicles; adjustments are made by the Fund staff from other sources of information (for example, vehicle registrations).
The ICBS collects data on the number of West Bank workers employed in Israel. Collection of similar data for the Gaza Strip was discontinued in 1994. However, DCS does collect data on the number of Palestinian workers from the Gaza Strip in Israel.
As indicated above, through 1993, ICBS compiled the WBGS’ service transactions with the rest of the world.
ICBS provided information on transfers relating to UNRWA through 1993. EAP refers to external financial under the World Bank Emergency Assistance Program that was initiated in 1993. The World Bank has assembled the Matrix of Donors’ Assistance with the objective of having the PA assume this responsibility in time. Indeed, MOPIC has recently assumed full responsibility for compiling this information on external financing.