All finance directors need to control their budgets and cash flows. Otherwise, your shop, your corporation or your country enters the world of bankruptcy.

Palestinian Treasury officials have never been able to plan future positions from a position of stability. Blame Israel, internal politics, donors not fulfilling pledges, etc, but their excel spreadsheets have often lacked substance.

The draft budget for 2013 was presented this week in Ramallah. As noted by Finance Minister, Qassis, Israel has not transferred funds for January. Further, Arab countries have yet again defaulted on promises of support. Palestinian Monetary Authority (PMA) chairman, Jihad Al Wazir, says that from 2008 to 2012, handouts have dropped by two-thirds to a paltry US$600 million.

I am sure that the irony was not lost on the cabinet when a seminar, hosted by Transparency International the previous week, had noted how there was a need to take “measures to improve oversight of PA financial controls at the borders and increase coordination between the border and finance authorities.”  To put it diplomatically, money is simply going astray.

There are clear positives, which give room for cautious optimism. A feature posted on CNBC noted that while the public sector debt was moving dangerously upwards to over 12% of gdp, the PMA has ensured that the banks have been protected from financial harm.

The banking system’s Tier 1 capital, its main benchmark of health, stood at a remarkably robust 24 percent of assets last year, according to the IMF. Struggling European banks’ Tier 1 ratios generally hover between 7 and 10 percent, and at around 8 percent for Israeli banks. Non-performing loans at Palestinian banks stand at less than 3 percent of total loans, and debt-to-deposit ratios remain far healthier than in neighbouring Jordan and Israel.

In parallel to this island of stability has been the slow but detectable rise of a new middle class. Rawabi is a fascinating new town, located near the city of Ramallah. Its development has been encouraged by Israel. Intriguingly, much of the properties are slated for young couples with ‘new money’. And that trend is matched by the growth of Palestinian women in employment, and more specifically as entrepreneurs. Their numbers may now be as high as 30% of the labour force.

Personally, I have found it interesting to read a Palestinian blog describing the “flood of Israeli goods” entering Gaza. While the author clearly believes that this is not a healthy situation, they also failed to note that Egypt has began to waste smuggling tunnels on its border with Gaza. This vital lifeline “brings in an estimated 30 percent of all goods that reach the enclave.”

And of course, if the Palestinians cannot rely on their Arab neighbours for donations, the good news is that the contributions from the relatively affluent EU taxpayer have not seized up. It is difficult to assess accurately the level of payments that the EU devolves to each citizen in Gaza and in the West Bank, as Brussels conceals the statistics. However, the direct directives added up to almost €200 million in 2012. This not only went to financing salaries of civil servants. As confirmed by leading local politicians, the money financed the living standards of convicted terrorists.

For all these positives and their starts, significant change will not come for sometime. The geopolitical dynamics will see to that. In addition, tunnel destruction, rising debt and continuing corruption do not facilitate a mass Palestinian socio-economic revival. As one Palestinian commentator indicated, when the wife of a senior PLO official spends $20,000 for dental treatment in Tel Aviv at a time when there is no shortage of renowned Palestinian dentists in Ramallah, Bethlehem and Nablus, the average citizen is forced to deals with inconvenient truths.

Over the next few months, UN committees, the World Bank, the EU and others are due to release reports blaming continuing Palestinian government poverty on the punishing measures of the Israeli government. There is no space to discuss here what is “punishing”, but even one roadblock has a limiting effect on the surrounding economy.

However, as an economist, I am forced to ask if these international bodies have considered whether the actions of Palestinian leaders are responsible for their own financial mess. Once all the mud-slinging and spin is eliminated from the Palestinian playing field, the regimes in Gaza and in Ramallah are just that – regimes, dictatorships. Historically, these types of government rarely to deliver economic freedom for their voters………….which is why the economists in Ramallah find themsleves ruling over a bankrupt treasury.