FAYYAD DISCUSSES FINANCES, PLANS FOR PA ROLE IN

C O N F I D E N T I A L JERUSALEM 000222

SIPDIS

NEA FOR FRONT OFFICE AND NEA/IPA, NSC FOR SHAPIRO/PASCUAL,
DEPT PLEASE PASS TO USAID FOR ANE/MEA: MCCLOUD/BORODIN

E.O. 12958: DECL: 02/02/2019
TAGS: EAID ECON KWBG PGOV IS PREF PTER
SUBJECT: FAYYAD DISCUSSES FINANCES, PLANS FOR PA ROLE IN
GAZA RECONSTRUCTION

Classified By: Consul General Jake Walles, for reasons 1.4(b) and (d)


1. (C) Summary: In a January 28 meeting with the Consul
General, Palestinian Authority (PA) Prime Minister Salam
Fayyad described his plans to involve the PA in Gaza
reconstruction, and expressed concern about the PA's dire
financial situation. He also expressed appreciation for the
Obama Administration's immediate focus on the region and for
the appointment of Senator Mitchell as Special Envoy. End
summary.


2. (C) Fayyad told the Consul General he appreciated the
Administration's immediate focus on the Israeli-Palestinian
issue, including its appointment of Senator Mitchell as
Special Envoy.

PA assistance to Gaza
--------------


3. (C) Fayyad described his efforts to give the PA a
prominent role in assistance for Gaza. He suggested using UN
agencies to distribute PA cash payments to Gazans whose homes
were damaged or destroyed. Keen to do this quickly, Fayyad
noted that the UN "provides a shield" from other mechanisms
that would be prone to abuse. At the same time, Fayyad also
complained that the UN is too deferential to Hamas. He said
that, even when Hamas arrests one of their staff, the UN does
not say anything publicly.


4. (C) The PM laid out his plan for a PA-financed housing
subsidy program. He has been in consultation with leading
Palestinian and Arab banks. He said the program would draw
on the institutional capacities of the banks and include a
small loan component (25%),but would mostly be a grant. The
idea is to give people the money to rebuild their homes with
a front-loaded loan component to ensure that they do not
simply pocket the money. The PA would essentially pay out
the 75% of the value of the loan as a grant. He noted that
there needed to be some sort of end-use certification, to
make sure that people really were using the money to
build/re-build homes. He wants to design the program and get
the banks' buy-in and then take the program to the donors.


5. (C) Fayyad said he plans to use a public appearance on
February 4 to announce the housing subsidy program. "We need
to come up with something concrete. We can't wait for the
GOI to say yes."

PA faces "huge problem" paying salaries
--------------


6. (C) Fayyad said that he faces the "huge political risk" of
not meeting his wage bill payment in early February. He said
he is actively seeking Saudi assistance to pay salaries,
begin the cash assistance program in Gaza, "and get an early
start on Cairo." Absent new donor funds, Fayyad said he
plans to ask PA employees to accept a delay in payment. He
said that a delay would "get everyone focused" on the PA's
dire financial situation and would enable to him to make the
case that the PA is focused on "Gaza first, now" as a
political message.


7. (C) "Even without Gaza," he said, "I still have a huge
problem." "So I might as well redefine the problem," he
said. "I have no choice. My back is against the wall. I
recognize this is rolling the dice, but I have nowhere to
hide."
WALLES