RESPONSE ON FISCAL TRANSPARENCY IN THE PALESTINIAN

UNCLAS JERUSALEM 000554 SIPDIS SENSITIVE SIPDIS NEA/IPA FOR SHAMPAINE/SACHAR; EEB/IFD/OMA FOR SNOW AND FIGUEROA; H FOR BUTTE-DAHL; NSC FOR PASCUAL; TREASURY FOR CONNOLLY DEPT PLEASE PASS TO USAID FOR MCCLOUD/BORODIN E.O. 12958: N/A TAGS: EAID ECON KWBG PREL KPAL EFIN SUBJECT: RESPONSE ON FISCAL TRANSPARENCY IN THE PALESTINIAN AUTHORITY REF: STATE 16737 ¶1. (U) The Palestinian Authority (PA) under Prime Minister and Minister of Finance Salam Fayyad is committed to fiscal transparency and has instituted a number of reforms since taking office in July 2007. ¶2. (U) On March 26, Fayyad relaunched the Ministry of Finance website (www.pmof.ps) to serve as the central point for publication of PA budget, revenue and expenditure information on a monthly basis. ¶3. (SBU) The following responses are keyed to the questions in paragraph 7 of reftel. -- Although the 2008 budget has not yet been formally adopted, the PA has announced that, when approved by the Cabinet and President, the budget will be made public via the Ministry of Finance website. -- The PA makes revenue and expenditure information publicly available. Such information has been distributed to international donors and is now posted on the above website. The PA is committed to publishing monthly reports that reflect actual revenues and expenditures by each ministry, wage payments for civilians and security, and external budget support received. -- Information produced by the current government is meaningful and accurate. Revenue and expenditure information for 2006 and 2007, during the period of the HAMAS government, is understood to be incomplete. The current government has cooperated with IMF efforts to review revenues and expenditures during that time period, but some uncertainty remains, particularly in the area of expenditure commitments. -- Any gaps on fiscal transparency are the result of capacity limitations, not lack of will. PM Fayyad has publicly committed himself and his government to full transparency, and he has repeatedly opened the PA's books to the IMF and donors, including the USG. As part of the transfer of USG assistance to the PA budget, USAID hired an independent auditor to review the PA's public financial management structures. The review uncovered no significant fiscal irregularities. -- In addition to a number of programs that support good governance, the USG specifically supports improvements in the transparency of the overall Palestinian financial system through USAID's Modernizing Financial Infrastructure program. -- A number of donors provide assistance to the Ministry of Finance. In particular, the European Commission (EC) has provided training to Ministry officers and supported the creation of an external auditing institution. Fayyad has consistently sought IMF assistance and advice, including two visits since July 2007 by technical specialists in the area of public financial management. The PA has also asked the IMF and the World Bank to provide quarterly reviews of implementation of the Palestinian Reform and Development Plan, to include assessments of both budget execution as well as overall financial management. -- According to the IMF's Senior Resident Representative for the West Bank and Gaza, because the PA is not a member of the IMF, it does not qualify for voluntary reporting on standards and codes. ¶4. (U) The full text of PM Fayyad's March 26 statement on fiscal transparency can be found on ConGen Jerusalem's unclassified intelink site at: SIPDIS http://www.intelink.gov/communities/state/pal econ. WALLES