ABSTRACT
In the Oslo period the PA succeeded in creating new budgetary mechanisms where none had previously existed, increasing its revenues to internationally respectable levels, and keeping overall deficits and debt under control, at least up to the start of the second intifada in late 2000. However, the PA relied heavily on indirect taxes to generate revenue, the clearance arrangements were a source of vulnerability (as demonstrated in 2001-2002 when the Israeli government refused to transfer the revenues it collected), the PA’s accounts were not comprehensive (some revenues and expenditures were effectively off-budget), and its spending, with respect to public sector employment in particular, was not firmly under control. The overall performance was also heavily dependent on foreign aid, and there was an undesirable split between recurrent and development budgets. The intifada created additional pressures on the budget, and one outcome of these was an intensification of fiscal reform from 2002.
