Policy Roundtables

Government Expenditure Reduction Strategies: What Policies does the Government have Available for Fiscal Consolidation?

author: Palestine Economic Policy Research Institute - MAS
year: 2023

The budget serves as the Ministry of Finance’s practical plan to achieve economic, financial, and social objectives outlined in the development plans. It is formulated based on studies and estimates conducted by the ministry, utilizing assumption-based data to determine budgetary items. The budget structure comprises three main categories of 
financial tools. Firstly, it includes public expenditures, encompassing spending on goods and services, wages, salaries(including simi-salaries and non-salaries), net lending, social services, security, and current, development, and investment expenditures. Secondly, public revenues are derived from various local and external sources, including tax and non-tax revenues, fees, and profits. Lastly, the budget addresses the deficit and outlines strategies to finance it, including net lending, revenue collection, external assistance, and domestic and external borrowing to bridge the financing gap.

The budget of the Palestinian Authority encounters various internal constraints and negative structural developments. One significant constraint is the allocation of a considerable portion of the current budget, exceeding 68% in recent years, to the health and education sectors. This prioritization has resulted in a reduced share for the  agriculture sector, as sectors like health, education, and security have been given precedence. It is worth noting that the security sector alone accounts for 28% of public expenditure, further limiting spending on other sectors.

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