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Palestinian government debt hurts private sector

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With Palestinian government debt piling up, the Palestine Monetary Authority is now preventing it from borrowing more from local banks. As a result, civil servants have been paid late or only partially.

Sami Musleh, 36, who works for the Civil Affairs Ministry, only received $1,000 of his $1,250 monthly salary in July. Half his income goes to loan payments and one-fifth to private school fees.

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Education Ministry employees Munir Barghouti and his wife spend more than half their combined income of $1,340 a month paying off loans, and are worried about falling behind. "Both of us take from the same source (the government), and if this source has no money, we can’t eat," Barghouti, 34, said.

The crisis is starting to hurt private businesses.

Some sectors have been more robust than others, particularly construction and IT. But the Palestinian Authority owes private companies some $500 million and has no way of paying it back.

The Jerusalem District Electricity Co., a private Palestinian distributor, is owed nearly $175 million, both by the Palestinian government and residents of 12 refugee camps who haven’t paid for electricity in more than a decade.

The private company has passed some of the debt to its supplier, Israeli’s Electricity Corp., which is threatening to shut down service to half a million Palestinians starting next week. "Israel won’t inform us which line it will cut," said Hisham al-Omari, director general of the Jerusalem company. "It might be the president’s headquarters or hospitals."

The Israeli supplier says it’s considering cutoffs, but has not made a final decision.

"It’s a nightmare," Mahdi al-Masri of the Al Ayyam printing and publishing company said of the possibility of repeated blackouts. Factories have generators, but power cuts would affect homes and small businesses, setting off a ripple effect, said al-Masri, former head of the Palestinian Federation of Industries.

Al-Masri and Mustaklem, the drug importer, say the current crisis is the worst they’ve had to contend with.

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Mustaklem said he’s had to shelve plans of expanding his business with a $3 million investment. Instead, he’s trying to stay afloat and keep on his 50 employees.

"We are on the edge of bankruptcy," he said.

Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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