Palestinian President Mahmoud Abbas Saturday signed the Palestinian Authority budget for the 2013 fiscal year, a day before deadline. Despite the administrative stability that signing the $3.9-billion budget conveys, it nonetheless consists of political, economic and constitutional contradictions and pitfalls.

The main contradiction is political. The budget’s official intention is to help the population resist the Israeli occupation and strive toward establishing a state. At the same time, however, the Palestinian Authority is financially dependent on Israel and the donor states, first and foremost the United States.

Since Palestine was accepted as a non-member of the UN in November 2012, Israel and the U.S. have imposed a financial punishment in response to every step they label as one-sided. Israel blocked the customs and VAT revenues it charges for the PA for imported and Israeli goods marketed in the West Bank and Gaza Strip. These funds make up about two-thirds of the PA’s revenues.

The U.S. has frozen the donations it promised the Palestinians, including $200 million in budgetary assistance. Europe and especially the Arab states, like Saudi Arabia and Qatar, failed to keep all their promises to help the PA. Palestinian-American business consultant Sam Bahour is convinced the Arab states’ stinginess cannot be separated from their close alliance with the U.S.’s policy toward the Palestinians.

U.S. President Barack Obama’s visit to Israel and the West Bank released both the funds Israel had suspended and the American funds blocked by Congress. Many assume the funds were unblocked in exchange for Abbas’ promise to resume the negotiations with Israel and revoke his demand that Israel freeze the construction in the settlements.

Even if the funds were unblocked without a concession on Abbas’ part, the PA is still in danger of sanctions and a deepening financial crisis. The PLO and PA are committed to fiscal stability, which requires appeasing Israel and the U.S. This means preserving a political status quo, which is contrary to the budget’s declared goal of advancing the popular and political struggle against the occupation.

The Palestinian public expects “Palestine” - the non-member state in the UN - to invoke the International Criminal Court, especially regarding the settlements. The U.S. and European states, not only Israel, strongly oppose this step. The question is, can the Palestinian leadership make this move while expecting the donor states to cover its budgetary deficit?

Preserving the status quo is reflected in the large defense budget - almost $1 billion, comprising 28 percent of the current budget ‏(compared to 16 percent for education and 10 percent for health‏), and 26 percent of the overall budget. The large defense budget has been criticized because it is seen as part of the internal oppression system, as well as maintaining the crumbling Fatah movement’s hegemony and the status quo with Israel.

Officials in the Palestinian Legislative Council have told Haaretz that due to this criticism, the last two years’ budget has concealed the full defense and security allocations, which are believed to be even higher.

About 41 percent of the PA’s 145,000 civil servants - some 65,000 - are registered as defense workers. But 62,000 of them live in the Gaza Strip, while collecting their wages from the Ramallah-based PA. Those registered as defense employees - 34,000 - and many of the remaining civilian officials are not Hamas government employees. Their wages are paid as a sort of allowance or benefit, as the Ramallah-based PA government does not share in tax revenues collected by Gaza’s Hamas-controlled government.

These accumulating expenses are an economic and political pitfall for the PA budget, while Hamas benefits.

The expected revenues from taxes and other tolls in 2013 are some $2.6 billion, leaving a gap of $1.4 billion between expenses and revenues. This difference reflects the huge losses incurred to the Palestinian economy by Israel’s occupation and control of the land, water sources, minerals and electromagnetic space.

Together with the imposed traffic limitations and other restrictions this amounts to at least half a billion dollars a year. In addition the PA spends huge sums incurred by the occupation, such as allowances for prisoners and released prisoners, fines and legal representation in military courts and legal and economic assistance for area C residents.

Finally, the budget was approved before the PLC had a chance to discuss it and raise objections, contrary to the procedure intended to maintain both a legislative and executive authority. The way the 2013 budget was approved therefore is both undemocratic and contrary to Palestinian legislation.

Open gallery view Barack Obama walking down Cross Hall with Israeli Prime Minister Benjamin Netanyahu and Palestinian President Mahmoud Abbas, September 1, 2010. Credit: Reuters