Direct Financial Support to the State of Palestinevia PEGASE in 2014 & 2015

The Israeli occupation is the main obstacle to development in the occupied Palestinian territories. A sustainable economic growth depends on a political solution which would enable freedom of movement of persons and goods. This lack of basic preconditions for economic growth has caused a heavy aid dependency of the Palestinian Authority (PA). To reduce external financing needs, PA is looking into measures on how to increase domestic revenues through increasing the tax base and additional restraints on recurrent expenditures, such as the freezing of wages. The war during the summer of 2014 has also had a great negative impact on PA's economy which has led to an increased reliance on foreign aid. The proposed Swedish contribution to PEGASE in 2014 aims at addressing the PA's budget deficit and the main objective of the PEGASE's Civil Servants and Pensioners (CSP) program is to provide salary and pension payments to PA employees who work with basic service delivery such as helath and education. The funds cover the salaries of the PA's civil servants and pensioners to ensure the functioning of essential public services such as schools and hospitals in the West Bank and Gaza. The contribution will meet the immediate needs of the beneficiaries and support PA's overall financial situation. Direct financial support to PA thus meet a financial necessity that enables important Palestinian authorities and institutions to function. Functioning institutions are a prerequisite for the implementation of the national development plan. PEGASE is assessed to be a well-established instrument for channeling funds to a specific result area and the support is in line with the Strategy for development cooperation with the West Bank and Gaza July 2008 – December 2011, prolonged until December 2014 (there is no formal project application from EU's end. Sweden is contributing in line with the strategy). There are control mechanisms developed within the framework of PEGASE which ensure good internal control. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx KOMPLETTERANDE INSATSBESLUT 2015 The Strategy for Sweden's international development cooperation with Palestine is now prolonged and valid from 2015-2019. The support to PEGASE is in line with the strategy's priorities.