BANK OF PALESTINE PAYS SOME PA SALARIES; OTHER

C O N F I D E N T I A L JERUSALEM 002245

SIPDIS

SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR
WILLIAMS/GREENE/WATERS/WAECHTER; NSC FOR
ABRAMS/DORAN/LOGERFO; TREASURY FOR NUGENT/DOWNARD

E.O. 12958: DECL: 06/05/2016
TAGS: ECON EFIN PGOV KWBG
SUBJECT: BANK OF PALESTINE PAYS SOME PA SALARIES; OTHER
BANKS PLEAD LACK OF FUNDS

REF: A. JERUSALEM 2200


B. JERUSALEM 2226

Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d).


1. (C) Summary: In response to instructions from the PA
Ministry of Finance, the Bank of Palestine (BoP) began June 4
to deposit PA salary payments into BoP accounts of PA
employees. Funds for the payments reportedly came from a PA
account for domestic revenues held at the BoP's Ramallah
branch office. In accordance with the salary payment plan
announced by PA Prime Minister Haniyah May 30, only PA
employee account-holders earning NIS 1,500 (USD 335) or less
per month received payments (about 10,300 people) and only a
one-month salary. Other banks operating in the West Bank and
Gaza publicly announced that they had received no transfer of
funds from the PA and, therefore, could not pay the salaries
of their PA employee account-holders. The banks emphasized,
however, that they would continue offering PA employees a
one-month advance on their salaries and loans, if they
qualify, with particular attention to low-income PA
employees. End Summary.


2. (SBU) Local Arabic language press reported June 5 that PA
employees holding accounts at the Bank of Palestine (BoP) had
started receiving salary payments late on June 4. Other
banks, citing a lack of funds and the absence of any
transfers from the PA, did not make any salary payments to
their PA employee account-holders. In accordance with the
PA's payment plan, the BoP made payments equal to one month's
salary and only to those PA employees earning NIS 1,500 (USD
335) or less per month.


3. (C) BoP Chairman Hani Shawa confirmed to EconOff the June
5 press accounts and explained that a PA account for domestic
revenues at the BoP's Ramallah branch had accumulated
sufficient funds, NIS 13 million, for the BoP to pay
lower-salaried PA employees with accounts at BoP (10,300 PA
employees). Therefore, when the Ministry of Finance ordered
BoP to pay these salaries from this account, BoP "couldn't
say no." Shawa emphasized that the Ramallah account had been
established long before the formation of the current
Hamas-led PA government as had the mechanism for disbursing
funds from the account. As a consequence, he said the BoP
had no clear legal basis for refusing the PA's request.
Shawa stated that other banks, however, do not have
sufficient funds in PA accounts nor had they received any
transfers of funds from the PA. He added that, based on
previous credit facilities and loans, the PA continues to owe
BoP about NIS 100 million. He estimated total PA and private
sector debt to BoP at about USD 400 million. (Note: Other
banks, including Arab Bank, have previously cited the debt
owed to them by the PA as a major reason why they would not
continue to facilitate disbursements on behalf of the PA.
End Note.)


4. (C) Cairo-Amman Bank Regional Manager Joseph Nisnas told
EconOff June 5 that, contrary to some press reports, his bank
is not paying PA employee salaries. He said that the bank
continues to extend regular services to its customers, to
include loans to PA employees and private sector personnel.
Nisnas stated that PA accounts held by the bank did not
include any receiving deposits of PA domestic revenues. In
response to EconOff's question, he said he had also heard but
could not confirm that PA domestic revenues previously
transferred by some banks to the Arab Bank were now directed
to account(s) at the BoP. Commercial Bank of Palestine (CPB)
President Suheil Gideon told EconChief that any domestic
revenues that CPB has collected on behalf of the PA since the
change of government have been transferred to a PA account at
the Bank of Palestine. (Note: ConGenOffs have not yet been
able to confirm with Shawa that the Bank of Palestine is now
holding a single treasury account (STA) for the PA's domestic
revenue collection. Previously, Shawa has said that the BoP
had decided not to hold the PA's STA. End note.)


5. (C) In response to demands and even threats by armed
groups against banks declining to pay PA salaries, the Banks'
Association of Palestine posted notices June 5 in the three
major Arabic language dailies explaining that, other than the
BoP, the other commercial banks did not have the necessary
funds to pay PA salaries. The notices emphasized, however,
that banks would continue, whenever possible, to provide
advances on salary payments and loans to PA employees.
(Note: Finance Minister Omar Abdel Raziq told local media on
June 3 that the Arab Bank is excluded from the obligation to

pay partial salaries to PA employees. He indicated that
those who have bank accounts in the Arab Bank will receive
their payments from the PA Post Office. Reports indicate
that this has not yet occurred. End note.)


6. (C) Presidential Economic Advisor Mohammad Mustafa told
Consul General June 5 that he had been surprised to hear on
June 2 that the PA had committed to implementing its payment
plan the following week. Mustafa said that he understood
that the PA had just NIS 22 million in cash and a NIS 18
million credit facility with the Bank of Palestine to use for
this purpose. He added that the PA had assumed it could use
a Bank of Jordan facility, but was later informed that it had
been frozen. The PA had also insisted that banks pay
salaries from their own funds. The banks, however,
approached Palestinian Monetary Authority (PMA) Governor Abed
for help, and received his backing along with a commitment
from President Abbas to support the banks' independence.
Mustafa opined that the PA actions could backfire because now
more than ever the Palestinian public understands that the PA
alone is responsible for salary payments.
WALLES