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