VZCZCXYZ0000
OO RUEHWEB

DE RUEHJM #2201/01 1511516
ZNR UUUUU ZZH
O 311516Z MAY 06
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2475
INFO RUEHXK/ARAB ISRAELI COLLECTIVE IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE

UNCLAS JERUSALEM 002201 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
NEA FOR FRONT OFFICE; NEA/IPA FOR WILLIAMS/GREENE/WAECHTER; 
NSC FOR ABRAMS/DORAN/LOGERFO; STATE PASS TO USAID/BORODIN; 
TREASURY FOR ADKINS 
 
E.O. 12958: N/A 
TAGS: PHUM ECON ETRD PREL KWBG
SUBJECT: LIVING CONDITIONS DECLINE IN GAZA 
 
REF: JERUSALEM 2068 
 
¶1.  (SBU) Summary:  Anecdotal reports collected by ConGen FSN 
and USAID staff resident in Gaza indicate that Gazans have 
witnessed a decline in their living conditions in recent 
months.  According to the World Food Programme (WFP), Gazans 
have generally pared down consumption of goods to essential 
food staples.  In response to gas shortages and fuel price 
hikes, Gazans take public transportation to work, if they go 
to work at all.  Although banks still extend credit, it is 
mostly limited to PA or UN employees.  Private and public 
healthcare facilities continue to provide emergency care to 
patients, notwithstanding increasing concerns over drug and 
staff shortages.  End Summary. 
 
Uptick in begging and theft 
--------------------------- 
 
¶2.  (SBU) According to USAID and FSN staff in Gaza, there has 
been a noticeable rise in the number of Palestinians begging 
in the street, door-to-door, and next to ATMs.  Many of those 
begging are children, who are also selling goods and offering 
window-cleaning at traffic lights.  One headmistress at a 
school in Khan Younis said that some children had dropped out 
of school to beg in the streets in order to help their 
families.  This included rooting through garbage bins for 
food or raw materials.  Gazan households are also selling 
their jewelry and electrical appliances at pawn shops and 
markets.  The incidence of car and home theft has reportedly 
soared. 
 
Palestinians pare consumption down to essentials 
--------------------------------------------- --- 
 
¶3.  (SBU) Due to a flooding in the market of unexported 
produce, the prices of fruits and vegetables have markedly 
decreased.  The prices of basic food staples, however, such 
as flour, rice, and sugar, have remained high due to previous 
closures during which stocks were depleted.  According to the 
Palestinian Economic Development Company (PED), greenhouses 
in former settlement areas produced 12,500 tons of food, of 
which only 1,500 tons had been exported with the remainder 
entering the Gaza food market.  World Food Programme (WFP) 
reported that the prices of staple food supplies increased on 
average by 32.5 percent since January.  (Note:  Basic 
commodities are available and no shortages of flour have been 
reported since April.  Since March, no breadlines have been 
reported.  End Note.)  In some cases, fish prices have 
doubled due to a higher demand for fish protein in lieu of 
poultry culled as a result of Avian Influenza (AI). 
Sardines, the cheapest fish available, have doubled in price 
(reftel).  Besides fish, beans are widely viewed and utilized 
as a cheap source of protein. 
 
¶4. (SBU) WFP reported that some Palestinians have reduced 
their meal intake from three meals to one or two.  USAID 
staff noted that many Gazans are buying half the amount of 
meat that they used to purchase, are hoarding flour stocks 
and have reduced their consumption of dairy products and 
sweets.  Local grocery stores reported that sales of fresh 
meat have declined, and that frozen meat and chicken sales 
have risen by 15 percent.  In May, WFP noted that frozen fish 
sales have jumped 50 percent, despite a doubling in price. 
NGOs reported higher numbers of Palestinians signing up to 
receive basic food supplements. 
 
Higher fuel costs and shortages translate 
into people not showing up for work 
----------------------------------------- 
 
¶5.  (SBU) USAID and FSN staff met informally with local gas 
station owners who said petrol sales at their stations have 
fallen 20 to 25 percent because of gas shortages and price 
hikes.  Some gas stations told the staff that sales were down 
by as much as 40 percent.  Fewer personally-owned vehicles 
are in the street as Gazans turn to public transportation and 
walking.  Unpaid PA employees, mostly residing in Rafah, Khan 
Younis, and Deir el-Balah, reported that they will not pay 
for taxi fares or pay for the cost of fueling their cars to 
get to work.  Taxi companies told USAID staff that their 
business had decreased by one-half in the last two months. 
WHO staff confirmed that there is less movement of cars in 
Gaza and that many people choose to walk to work, rather than 
pay the cost of transport.  PA employees are reportedly 
taking early annual leave or rotating shifts with other 
employees in order to avoid commuting costs. 
 
Empty stores and empty pockets 
------------------------------ 
 
¶6.  (SBU) The private sector has experienced a sharp downturn 
as a result of reduced incomes.  Purchases are limited to 
essential commodities, evidenced by a sharp drop in the 
purchase of non-essential goods and services.  As a result of 
the fall in demand and the unavailability of raw materials, 
factory owners told USAID staff that they are operating at 25 
percent of capacity.  Gazans are also switching to the 
purchase of locally manufactured consumer goods, which may be 
inferior.  In an informal survey, USAID staff spoke to 
restaurant and cafe owners who said sales are down by 60 to 
75 percent, while local gyms and sports facilities reported a 
decrease of clientele by 40 percent.  According to one 
retailer, apparel purchases have decreased by 50 percent. 
(Note:  Teachers in Gaza reported that students attend 
classes in winter clothes and uniforms because they have not 
purchased spring/summer uniforms.  End Note.)  Some stores 
have responded to a lack of sales and increased insecurity by 
reducing store hours 50 to 70 percent. 
 
¶7.  (SBU) Palestinian daily Al-Ayyam reported that over 40 
percent of government employees borrowed on credit from 
supermarkets.  One wholesaler told USAID staff that the PA 
owed the store NIS 800,000 (USD 180,000) for its purchases 
made since March.  Small and medium-sized supermarkets no 
longer allow the purchase of food on credit, because of lack 
of funds to replenish their stocks. 
 
Banks warn that currency, especially NIS, 
will soon dry up; minimal credit available 
------------------------------------------ 
 
¶8. (SBU) Palestinian private banks are curtailing cash 
advances to PA employees, although some continue to provide 
advances or provide overdraft facilities on a case-by-case 
basis.  The Bank of Palestine offers NIS 500 to 1000 (USD 112 
to 224) in cash advances to PA employees.  Banks, such as the 
Arab Bank, continue to lend money, mainly to employees from 
UN agencies such as UNDP and UNRWA.  Arab Bank and Bank of 
Jordan are extending grace periods for existing loans. 
 
¶9.  (SBU) Banks no longer allow unlimited withdrawals and 
some observers believe that money in circulation will soon 
dry up.  Bank of Palestine reported that although there are 
ample New Israeli Shekels (NIS) in present circulation, 
unpaid government salaries and purchases by local traders 
from Israel will soon create a shortage of NIS.  According to 
these banks, USD and Jordanian Dinars are in sufficient 
quantity and are increasingly used for transactions.  ATMs 
are operational, but many ATMs in remote areas have been 
closed. 
 
¶10.  (SBU) USAID staff, who spoke with officials of the local 
telephone company Paltel, estimated that 50 percent of all 
telephones in Gaza have been disconnected.  Due to delinquent 
payments, 15,000 telephone lines, the majority owned by PA 
employees, have been temporarily suspended and 572 phone 
lines have been permanently cut.  Paltel announced in March 
that it will not disconnect the landlines of PA employees who 
are delinquent until salaries are paid.  In May, Paltel said 
it was starting to face difficulty since only 30 percent of 
its clients pay their telephone bills.  Paltel also reported 
a 20 percent downturn in visits to its stores. 
 
Emergency care only; Palestinians 
refusing to pay for healthcare service 
-------------------------------------- 
 
¶11. (SBU) According to reports from USAID staff and WFP, a 
lack of medical supplies and staff shortages has forced 
clinics and hospitals to work only on emergency cases, and to 
forego elective non-essential surgeries.  (Note:  Al Nasser 
Hospital in Gaza announced that it will not be able to run 
its Intensive Care Unit (ICU) without medical supplies.  End 
Note.)  In some cases, medical disposables are being re-used 
due to a supply shortage.  When medicines are not available 
at clinics or health centers, Palestinians are reportedly 
buying herbs and pain killers.  In some cases, increased 
doses of weaker drugs are being provided in place of 
stronger, more expensive medication.  Patients with chronic 
diseases, the majority of whom are refugees, are able to fill 
their prescriptions from UNRWA clinics.  Non-refugee patients 
have been turning to unlicensed health facilities and even 
homeopathic care for treatment. 
 
¶12. (SBU) In order to handle more patients and rising 
operational costs, several NGO clinics told USAID staff that 
they have resorted to levying higher patient fees, which has 
meant that fewer patients are able to afford private care. 
In many cases, patients refuse to pay after they receive 
healthcare services.  One husband refused to pay an OB/GYN 
clinic after his wife delivered a baby, reportedly telling 
the clinic to take his baby as payment.  The clinic 
discharged the patient and newborn without further care. 
USAID noted NGO reports that the patients who are most in 
need of MOH services do not subscribe to the national health 
insurance, and are therefore not eligible for subsidized 
health care.  (Note:  PA employees are required to register 
with the National Health Insurance.  Non-PA employees must 
purchase the health insurance separately.  End Note.) 
Stevens