03. 2015 SALARIES IN THE PALESTINIAN PUBLIC SECTOR: CHALLENGES AND IMPLICATIONS Since December 2014, public employees in the occupied Palestinian territory(oPt) have not received their full salaries. Israel is currently withholding clearance revenu­es which it collects on behalf of the Pale­stinian Authority(PA) – a step that is in­terpreted as collective punishment for the Palestinian initiative to become member of the International Criminal Court(ICC). The interruption of revenues flows, which accounts for roughly 127 million dollars a month, has again manifested the serious liquidity problems of the PA and the un­predictability of revenues. With constant restraints on its financial resources, the PA’s ability to pay its public employees has again deteriorated – with serious conse­quences: The insufficient payment of Pa ­lestinian public employees is already sho­wing considerably negative effects on the entire economy and the collapse of the PA apparatus seems to become a possible scenario. Israel’s withholding of Palestinian tax mo­ney, however, is only one of the elements contributing to the unpredictability of sa­lary payments. Government revenues are low in general due to the weak private sector and high unemployment rates in the West Bank and Gaza. Consequently, salaries still depend to a large extent on international aid that tends to be granted on a rather irregular basis. The ongoing tensions between Hamas and Fatah over responsibilities for salaries of the public sector in the Gaza Strip add another layer of complication to the challenge. The first to suffer are of course employees who of­ten support a whole family with their inco­me. This paper aims to shed light on the critical situation of salaries in the Palesti­nian public sector by focusing on several key features. Firstly, general facts and figures will be presented: What percentage of the Pale­stinian workforce is employed by the Pa­lestinian government? How much money is spent on salaries in the public sector? Have there been significant shifts in the size of the public sector work force? Secondly, there will be a closer look on the financing of the public sector which depends to a large extent on internatio­nal aid, Israeli transfers and bank loans. Thirdly, challenges and constraints within and for the public sector are tackled: the double structure of public employees in Gaza and the problem of low domestic re­venues in the oPt. Finally, possible soluti­ons regarding the shortage of budgetary funds both on an internal and external le­vel are going to be discussed. 1. The public sector: Facts and figu­res At the end of 2014, the public sector em­ployed 22.9% of those in employment 2 , with significant differences among the regions in the oPt. In the Gaza Strip, al­most half of the employed were working in the public sector(39.6%) whereas in the West Bank, the public sector represented only 16.5% of the employed. 1 In absolute numbers, the PA employed about 180,000 persons. Their salaries accounted for al­most 200 million dollars a month. 3 As such, the wages and pensions of the public sector represented almost half of the PA’s annual expenditure. Moreover, the share of the public sector in overall employment has risen over the last years. Design: ery foto Seite 1