THE WEST BANK & GAZA Palestinian Umbrella for Resilience Support to the Economy Multi-Donor Trust Fund (PURSE MDTF) EU Support for the Palestinian Economy and Resilience (ESPERE) I and II FY24 ANNUAL REPORT Reporting Period: July 1, 2023 to June 30, 2024 The Palestinian Umbrella for Resilience Support to the Economy Multi-Donor Trust Fund (PURSE MDTF) and the EU Support for the Palestinian Economy and Resilience (ESPERE) Annual Report is prepared by the World Bank as the administrator of the trust funds. The team wishes to recognize the contributions of the task teams from all the sectors working on projects co-financed by the PURSE MDTF and ESPERE. A special note of recognition and ac- knowledgment goes to the PA counterparts and development partners for their cooperation and contributions during the life of the trust fund, which has ensured the achievements of the PURSE and ESPERE programs. The PURSE MDTF and ESPERE are supported by generous contributions from the following donors: Contents 1. Introduction__________________________________________________________________________________ 6 2. Country Context_______________________________________________________________________________ 8 3. Engagement, Financing, and Assessment Since October 7 _________________________________ 10 World Bank Engagement in the WB&G Since October 7, 2023__________________________ 10 3.1.  Financing Facility for Recovery and Reconstruction – PURSE Restructuring ____________ 10 3.2.  3.3. Damage and Needs Assessment and CRF_______________________________________________ 11 4. Key Results and Updates____________________________________________________________________ 12 4.1. Pillar I: Macro-fiscal Stability and Public Financial Management_________________________ 13 4.2. Pillar II: Human Capital and Service Delivery ___________________________________________ 16 4.3. Pillar III: Private Sector Development and Job Generation_______________________________ 18 4.4. Pillar IV: Protection to the Poor and At-Risk Population__________________________________ 22 4.5. ASAs on Cross-Cutting Themes_________________________________________________________ 23 5. Cross-Cutting Themes_______________________________________________________________________ 24 5.1. Gender__________________________________________________________________________________ 24 5.2. Citizen Engagement_____________________________________________________________________ 25 5.3. Climate Resilience______________________________________________________________________ 26 5.4. Digital Technology_______________________________________________________________________ 27 6. Financial Overview __________________________________________________________________________ 28 6.1. PURSE Financials_______________________________________________________________________ 28 6.2. ESPERE Financials______________________________________________________________________ 31 6.2.1. ESPERE I Financials______________________________________________________________ 31 6.2.2. ESPERE II Financials_____________________________________________________________ 32 7. Strategic Priorities and Highlights Looking Ahead___________________________________________ 34 ANNEX 1 Summary of Results Matrix of Active Projects (As of August 30, 2024)_________________ 36 Contents 1 Abbreviations and Acronyms ABRS Automated Business Registration System AF Additional Financing AI Artificial Intelligence AML/CFT Anti-Money Laundering / Combatting the Financing of Terrorism ASA Advisory Services and Analytics ATF Associated Trust Fund AUP Acceptable Use Policy BRIDGE Business Regulation for Investment, Digitalization, Governance and Entrepreneurship C4W Cash for Work CCDR Country Climate and Development Report CE Citizen Engagement DP Development Partner DPG Development Policy Grant EC European Commission EQA Environment Quality Authority ESF Environmental and Social Framework ESPERE EU Support for the Palestinian Economy and Resilience FIA Financial Inclusion Account GBV Gender-Based Violence GRM Grievance Redress Mechanism HCPPP High Council for Public Procurement Policies HR Human Resources HSERP Health System Efficiency and Resilience Project IBRD International Bank of Reconstruction and Development IDA Interim Damage Assessment IPF Investment Project Financing IPSD Innovative Private Sector Development ISR Implementation Status and Results Report IT Information Technology MDTF Multi-Donor Trust Fund MoE Ministry of Education MoF Ministry of Finance 2 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report MoNE Ministry of National Economy MoSD Ministry of Social Development MPA Multiphase Programmatic Approach MRV Measurement, Reporting and Verification MTIT Ministry of Communications and Information Technology MTR Mid-Term Review PA Palestinian Authority PCBS Palestinian Central Bureau of Statistics PDO Project Development Objective PECS Palestinian Expenditure and Consumption Survey PEFF Palestinian Emergency Financing Facility PENRA Palestinian Energy and Natural Resources Authority PID Partnership for Infrastructure Development PISA Program for International Student Assessment PIU Project Implementation Unit PM&A Program Management and Administration PMA Palestine Monetary Authority PSP Payment Service Provider PURSE Palestinian Umbrella for Resilience Support to the Economy IRDNA Interim Rapid Damage and Needs Assessment RWU Regional Water Utility SDG Sustainable Development Goal SMEs Small and Midsize Enterprises SERATAC Supporting an Education Reform Agenda for Improving Teaching, Assessment and Career Pathways SPJ Social Protection and Jobs STEM Science, Technology, Engineering and Mathematics TA Technical Assistance TF Trust Fund TFGWB Trust Fund for Gaza and the West Bank TRA Telecom and Regulatory Authority WB&G West Bank and Gaza Abbreviations and Acronyms 3 4 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report PURSE & ESPERE at a Glance PURSE MDTF by the Numbers ESPERE I & II by the Numbers (as of September 30, 2024) (as of September 30, 2024) ESPERE I FUND VALUE: $126 €9 MILLION FUND $ $ $ $ $ $ $ $ $ $ VALUE: MILLION $ $ $ € € € € € € € € € PAID-IN FUNDS: $123 MILLION PAID-IN FUNDS: €7.5 MILLION € € € € € € € € $ $ $ $ $ $ $ $ $ $ $ $ $ COMMITTED OF 99% PAID-IN FUNDS COMMITTED OF 91% PAID-IN FUNDS ESPERE II FUND €9.7 6 VALUE: MILLION ACTIVE OPERATIONS € € € € € € € € € € = 3 under Pillar I $98 million PAID-IN FUNDS: €4.25 MILLION + € € € € € 1 under Pillar II $4 million COMMITTED OF + 93% PAID-IN FUNDS 1 under Pillar III $2 million + 1 under Pillar IV $5 million 2 OPERATIONS UNDER PILLAR III €7 million 6 ACTIVE BANK-EXECUTED ASAS 5 BANK-EXECUTED ASAS PURSE & ESPERE at a Glance 5 1 Introduction The Palestinian Umbrella for Resilience Support to the Economy (PURSE) Multi-Donor Trust Fund (MDTF) serves as a channel for donor co-financing to a wide range of World Bank activities in the West Bank and Gaza (WB&G). Its core aim is to strengthen sustainable recovery, economic reform, and social resilience in the WB&G by providing financial and technical support to the PA. There are two Associated Trust Funds (ATFs) to the PURSE MDTF, both funded by the European Commission (EC): the EU Support for the Palestinian Economy and Resilience (ESPERE) I and II. ESPERE I and II were established to accommodate the EC’s internal policies and regulations in a flexible manner and thereby enable the EC to co- finance activities under PURSE. ESPERE I was activated in October 2022; ESPERE II was activated in June 2023. As ESPERE I and II fall under the PURSE, they share the same governance structure and reporting mechanism. In order to coordinate funds effectively, all donors under the PURSE umbrella meet in the same annual partnership council meeting. The PURSE MDTF and its ESPERE ATFs operate alongside other World Bank Trust Funds in the WB&G, including the Trust Fund for Gaza and the West Bank (TFGWB) and the Partnership for Infrastructure Development (PID) MDTF. The TFGWB is replenished annually from the surplus of the International Bank of Reconstruction and Development (IBRD) and finances multiple World Bank operations in the WB&G. The PID was established in 2012 and focuses on infrastructure projects. The PURSE was established in 2021 and covers all other operations in 6 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report the WB&G, including macro-fiscal stability and public financial management, human capital investment and service delivery, private sector development and job generation, and protection to the poor and at-risk population. The PURSE has four pillars. Pillar I focuses on macro-fiscal stability and public financial management; Pillar II focuses on human capital investment and service delivery; Pillar III focuses on private sector development and job generation; and Pillar IV focuses on protection to the poor and at-risk population. The cross-cutting themes of gender, citizen engagement, climate resilience and digital innovation are central to the operations of PURSE and are implemented throughout its portfolio. PURSE and its ESPERE ATFs finance operations in both Gaza and the West Bank and operate under the World Bank’s strict fiduciary oversight policies. Figure 1: PURSE and ESPERE Structure PURSE & ESPERE Pillar 1. Pillar 2. Pillar 3. Pillar 4. CROSS-CUTTING Macro-fiscal Human Capital Private Sector Protection to THEMES: Stability Investment Development the Poor and Gender, and Public and Service and Job at-risk Climate Resilience, Financial Delivery Generation Population Citizen Engagement, Management and Digital Innovation Introduction 7 2 The WB&G, which was facing a challenging situation even before October 7, has been plunged into a profound crisis. The conflict in the Middle East, centered in Gaza, shows no signs of abating at present, despite diplomatic efforts to agree on a ceasefire. It is not possible to predict when the conflict will end or what governance or border restrictions will be in place at that point. Gaza is experiencing a catastrophe due to heavy fighting in densely populated areas combined with disruption to essential services. The entirety of the Gaza strip is on the brink of a widespread famine; ninety-five percent of Gazans are living in food insecurity and about a third of the population is experiencing catastrophic hunger. Over 1.7 million people have been internally displaced, some multiple times, with shelters overflowing and insufficient sanitation services. Some Country 60 percent of housing has been destroyed or damaged, along with over 85 percent of facilities in the health, education, and commerce Context sectors. The situation in the West Bank is also extremely challenging, with rising instability and violence, movement restrictions, and a profound economic shock including mass unemployment. The Palestinian economy has contracted sharply. Official data reveals a 35 percent decline in real GDP growth in the first quarter of 2024 for the Palestinian territories overall, the largest economic contraction on record1. This includes an 86 percent contraction in Q1 2024 in Gaza. In parallel, the West Bank economy contracted by 25 percent in Q1 2024, with trade, services, construction, and manufacturing sectors experiencing the most significant declines. These GDP figures are accompanied by dire rates of unemployment and poverty. Unemployment is estimated to have reached 51 percent in June 2024 – the highest on record. In Gaza, unemployment soared to 79 percent given the impact of the conflict on economic activity. In the West Bank, the unemployment rate is estimated at 32 percent in June 2024 due to the abrupt loss of jobs in Israel and the settlements as well as job losses in the local economy. Almost 100 percent of Gazans are now living in poverty, while the large economic contraction in the West Bank is estimated to have translated into an almost doubling of the poverty rate there in the short term – to 22.6 percent.  ource: The World Bank Economic Monitoring Report on Impacts of the 1 S Conflict in the Middle East on the Palestinian Economy, September 2024 8 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report The PA faces a severely deteriorating fiscal situation. The PA fiscal crisis reached unprecedented levels in 2024, largely due to increased Israeli deductions from Clearance Revenues in the aftermath of the conflict. Since October 2023, Israel has increased the monthly deductions to an average of NIS500 million, up from the previous NIS200 million monthly average. As a result, clearance revenue transfers, the PA’s lion’s share of income, shrank by over 50 percent in only a few months. Clearance revenue transfers were also fully halted for roughly two months in the first half of 2024, and were resumed on June 30, 2024. This, on top of the natural decline in revenues given the economic contraction, plus the low levels of aid, forced the PA to further reduce salary payments to an average of 60 percent, since October 2023. The 2024 deficit is expected to reach US$1.86 billion, and significant downward risks exist. In the absence of financing alternatives, covering such a deficit is expected to prove almost impossible for the PA and may pose elevated risks for a systemic collapse, especially affecting service delivery. Looking forward, the catastrophic damage in Gaza will require massive recovery and reconstruction efforts. The World Bank interim damage assessment (IDA) estimated the cost of damages as of the end of January 2024 to be US$18.5 billion and monthly assessments, and damages are believed to have increased significantly since then. All sectors have been affected: in healthcare, more than 93 percent of facilities have been damaged; in education, no children are currently in school; in the Gazan private sector, economic activity has been paralyzed while the majority of private sector establishments in Gaza have been destroyed. The World Bank has now begun work on an Interim Rapid Damage and Needs Assessment (IRDNA) jointly with the UN and EU, which will specify sector-level priorities. Substantially increased donor support will be essential for meeting the needs of the Palestinian people, securing the sustainability of the PA and supporting the recovery and reconstruction of Gaza. Yet, aid has fallen dramatically in recent years: in 2008, the PA received some US$2 billion in development aid, which comprised 27 percent of Palestinian GDP; by 2023, the PA was predicted to gain just US$324 million – 1.6 percent of GDP – in budget support and development financing. More funds are urgently needed to provide emergency support, assist the PA in tackling its profound fiscal crisis, and respond to the conflict for the benefit of the Palestinian people. The World Bank is working with development partners to seek opportunities to increase financing, and stands ready to channel such funds to where they are most needed, notably through PURSE. Current Country Context 9 3 In this chapter, section 3.1 puts the activities of PURSE and ESPERE into context by providing an overview of the World Bank’s engagement in the WB&G since October 7. Section 3.2 then focuses on damage and needs assessments, which are co-financed by PURSE and ESPERE. Sections 3.3 to 3.7 then provide updates on operations in each of the four pillars of PURSE, plus the four cross-cutting themes. World Bank Engagement in the WB&G 3.1.  Since October 7, 2023 The World Bank has remained engaged in the WB&G since October 7. In Gaza, the implementation of regular development activities has been paused. Instead, the program switched to mobilize US$35 million2 toward emergency interventions in Gaza through UNICEF, the World Food Programme (WFP) and the World Health Organization (WHO), Engagement, leveraging their proven track records of delivering in conflict. Third- party monitoring is used to verify that assistance reaches the intended Financing, beneficiaries. The US$35 million financed in-kind food packages, medical supplies and medicines, psychosocial services, hygiene kits, and drinking water distribution. As of June 2024, over 80 percent of and the financing has been disbursed3, providing food packages to over one million Gazans and vaccinating nearly 75,000 children. These interventions have the goal of reducing the risk and severity of disease Assessment outbreaks, childhood stunting, malnutrition, and mental health impacts. In the West Bank, the World Bank has continued to implement existing Since operations, while adapting activities and priorities to meet the needs which have emerged since October 7. However, while progress in the West Bank has been made, some activities have been implemented at October 7 a reduced pace because of movement restrictions, security concerns, and other difficulties. Financing Facility for Recovery and 3.2.  Reconstruction – PURSE Restructuring The PA has asked the World Bank to design and manage a financing and coordinating mechanism that can be deployed immediately once recovery and reconstruction activities in Gaza can begin. In response, the World Bank has proposed a restructuring of PURSE to broaden its scope to explicitly include the full range of activities required for recovery and reconstruction. The World Bank team is currently in close coordination with all PURSE donors throughout this restructuring process. This will enable PURSE to play a central role in recovery and reconstruction efforts. The restructured PURSE fund will aim to attract new donors and commitments while strengthening coordination among stakeholders.  hese funds include US$6.6 million from SERATAC (to provide wellbeing and 2 T psychosocial support kits), HSERP (to supply medical equipment, supplies and medicines) and the SPJ COVID-19 response project (to provide a one-time emergency payment to stranded Gazan workers in the West Bank). 3 By the time of finalizing this report, 100% of the funds had been disbursed. 10 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report Restructuring PURSE allows for a quicker initiation of fund disbursement compared to designing and launching a new fund from scratch. This represents an efficient way to enable donors to swiftly co-finance recovery and reconstruction needs in the WB&G. Once approved, the restructured fund would also continue with the existing operations supported by PURSE, and ongoing operations and donor contributions will not be affected by the restructuring. If approved, the restructuring will involve the following changes: • The Development Objective will be updated as follows: To strengthen sustainable recovery and reconstruction, economic reform, and social resilience in the West Bank and Gaza. • The scope will be expanded: the Trust Fund will continue to support PURSE’s four pillars of macro- fiscal stability, human capital, service delivery, financial and private sector development, and social protection. But it will expand to include additional sectors, such as infrastructure, water, urban, and energy, with the aim of also adding Gaza-relevant activities/pillars to the Administration Agreement. • The TF’s name will be changed to better reflect its broader remit (e.g., Palestinian Fund for Reconstruction and Development [PFRD]) 3.3. Damage and Needs Assessment and CRF PURSE is co-financing the World Bank’s damage and needs assessments, which form a key part of the current response ongoing events in Gaza. The World Bank publishes regular damage assessments, conducted by IPSOS, which draw on satellite imagery, social media, and information from partners on the ground. The World Bank is also producing bi-monthly economic updates which summarize the economic impacts of the conflict and propose key recommendations. In March 2024, the World Bank published the Interim Damage Assessment jointly with the UN and the European Commission (EC). The Interim Damage Assessment quantified the impact of the conflict in the Gaza Strip as it stood at the end of January 2024. The estimated cost of direct damages by that date stood at some US$18.5 billion: equal to 97% of the pre-conflict GDP of the WB&G. The assessment was based on the biweekly IPSOS reports, triangulated and validated by joint World Bank, UN, and EU sector teams through other sources. As of 24 August 2024, all sectors, except agriculture and housing, are assessed to have sustained more than 62 percent damage or destruction since the beginning of the conflict; even agriculture and housing have sustained more than 50% damage or destruction. The World Bank has now started work on an Interim Rapid Damage and Needs Assessment (IRDNA), which is being conducted jointly with the UN and EC. The expected delivery timeframe is mid to end November. This piece of work will propose sector-specific priorities and would inform subsequent recovery and reconstruction efforts by key national and international actors. The IRDNA will feed into the Conflict Recovery Framework (CRF). The CRF will be a programmatic and flexible (living) implementation plan and multi-stakeholder engagement mechanism for the operationalization of the IRDNA in the transition and early recovery phases over the next two to three years. The CRF is not a one-off product but is rather a process and platform that convenes multiple stakeholders around one common government-owned platform. This enhances coordination among government, development partners and other stakeholders during the initial phases of the recovery and reconstruction process, with the aim of boosting the effectiveness of aid. Together, the CRF and IRDNA will be two essential elements of a Gaza Reconstruction and Development Plan. Engagement, Financing, and Assessment Since October 7 11 4 Key Results and Updates 12 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report This chapter provides key updates on operations co-financed by the PURSE MDTF and its ATFs, ESPERE I and II. Information is provided on both Recipient-Executed operations and Bank-Executed Advisory Services and Analytics (ASAs), across the four pillars and cross-cutting themes. During FY24, many activities were impacted by the conflict in Gaza. While most implementation in Gaza has been halted temporarily, the focus has switched to a) providing emergency support; b) assessing damages and needs; and c) making preparations so that operations are ready to be implemented immediately once there is a cessation of hostilities. In the West Bank, operations have progressed though have in some cases faced delays caused by movement restrictions and the deterioration of security. In this chapter, Sections 4.1 to 4.5 provide updates on operations in each of the four pillars of PURSE, plus the four cross-cutting themes. 4.1. Pillar I: Macro-fiscal Stability and Public Financial Management COMPLETED OPERATIONS: DPG12. Supporting Transparency, Inclusiveness and the Green Economy (P177848) Approval Date: June 7, 2022 Closing Date: December 29, 2023 Total Grant Financing: US$ 52.5 million (including PURSE: US$22.5 million) Progress towards PDO: l Moderately Satisfactory Implementation Progress: l Moderately Satisfactory Disbursement Ratio: 100% Objective: To (i) improve public resource management and support inclusiveness, and (ii) strengthen governance in the water sector and accelerate the greening of the economy. Development Policy Grant (DPG) 12 closed on December 29, 2023, while achieving its objectives. Three of its five results indicators were achieved: a) an estimated 11,580 financial inclusion accounts were opened by December 2023, exceeding the target of 10,080; b) two regional water utilities (RWUs) were established and licensed in the northern West Bank, and interviews with the Palestinian Water Authority confirmed that another RWU for East Jenin in the West Bank is scheduled to be established in 2024; and c) a measurement, reporting and verification (MRV) system was instituted at the Environment Quality Authority to track greenhouse gas emissions. However, two indicators were not achieved: a) the target of eight high-procuring entities executing procurement transactions through an electronic system was delayed until December 2024; and b) the target of two key ministries (the Ministry of Social Development Key Results and Updates 13 and the Ministry of Education) preparing gender-responsive budgets was delayed until December 2024. For both indicators, existing delays were exacerbated by the impact of the conflict since October 7. Bringing a Gender Lens to the Impact of Fiscal Policy and Social Programs ASA (P179253) Approval Date: October 19, 2022 Project Closing Date: June 27, 2024 Total Financing: US$50,000 (including PURSE: US$50,000) Objective: To better understand how fiscal policy impacts differ across gender in the WB&G at the household and individual levels This activity served as a complement to the World Bank’s comprehensive Fiscal Incidence Analysis for the Palestinian territories. The initial task was to compile a dataset linking administrative data on revenue collection and public spending to household/individual data that is decomposable by gender. This allowed for the gendered impacts of fiscal policy to be uncovered not only between households, but within them as well. The team has applied the methodology developed by the Commitment to Equity Institute to unpack a number of gender inequalities in the WB&G, for example through employment, entrepreneurship and other opportunities created by the incentive structure of fiscal policy. Key findings show a widening gender wage gap over time, with persistently low female labor force participation over the last two decades. For almost two thirds of women outside the labor force, the main reason cited is the burden of household tasks and family responsibilities. Fiscal instruments did not play a significant role in reducing the gender welfare gap. The results of the analysis will be presented through a technical workshop with officials in PCBS as part of the dissemination strategy for the material, and future national surveys will include questions to allow for a more granular unpacking of gender dynamics in the WB&G. ACTIVE OPERATIONS: Development Policy Grant 13 (P179609) Approval Date: March 17, 2023 Closing Date: December 31, 2024 Total Grant Financing: US$ 62.2 million (including: PURSE: US$32.2 million) Disbursement Ratio: 100% Objective: To i) Improve the structural fiscal balance and strengthen the effectiveness of public procurement, and ii) Strengthen the integrity of the financial sector and pursue digital transformation. Under DPG-13, progress has been made towards the results indicators despite the challenging situation since October 7. The target for prior action 1 was to increase the share of domestic VAT collections to domestic tax revenues from 37 percent (as of December 2022) to 39 percent by December 2024; from January to July 2023, the ratio fell to 33.1% due to technical issues related to data transfer to the new portal, but rose to an average of 41% between August and December 2023. Prior action 2 specified that the number of new appointments into public employment should be no more than 50 percent of the number of departures; the 2023 figure was 67 percent for the civil sectors, though the ratio for permanent staff alone was 49 percent. In the security sector, the ratio of hires to exits reached 132 percent in 2023 as efforts to control hiring were not fully extended to this sector, considering the 14 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report economic downturn as a result of the conflict, the deteriorating security situation, especially after the outbreak of the conflict, and the PA’s role as an employer of last resort while the private sector remains constrained. The target for prior action 3, for 80 percent of public procurement staff to complete a training program by December 2024, is expected to be delayed due to movements restrictions in the West Bank and the emergency work attendance requirements adopted by the PA. Under prior action 4, seven out of 13 banks, collectively representing 60.4 percent of the total assets in the banking sector have been inspected to ensure compliance with the new Palestinian Anti-Money Laundering/Combating the Financing of Terrorism procedures; the Palestine Monetary Authority (PMA) is working to inspect the other targeted banks by December 2024. Under prior action five, cashless transactions have increased by 106 percent since June 2022, against the final target of 150 percent by December 2024. Finally, under prior action 6, 924 women-owned businesses accessed microfinance institutions as of September 2024, against an end target of 1,500 by December 2024. The PMA reports that the pace of progress on this indicator has slowed down since the outbreak of the conflict, and it is questionable as to whether this DPG target will be achieved on time. Palestinian Emergency Financing Facility (PEFF) (P504704) and Additional Financings Approval Date: February 20, 2024, and July 5, 2024 Closing Date: December 30, 2024 Total Grant Financing: US$146.7 million (including PURSE: US$19.7 million)* Progress towards PDO: l Satisfactory Implementation Progress: l Satisfactory Disbursement Ratio: 80%4 Objective: To contribute to service delivery in the West Bank. *Note: The PEFF AF 2 in the amount of $80 million has been approved by the Board on September 30, 2024. The PEFF provides emergency support to the PA during a fiscal crisis. It is a fast-disbursing financing facility to contribute to service delivery in education and health sectors in the West Bank. The temporary use of a fast-disbursing Investment Project Financing (IPF) facility to support the fiscal position of the PA builds on the foundation of the World Bank’s longstanding provision of fiscal support to the PA. The facility supports service delivery in the West Bank, by retroactively financing education and health civil servants’ salaries. The PEFF Parent Project and First Additional Financing (P504704) were approved on February 20, 2024 and July 5, 2024, and became effective on February 29, 2024 and July 9, 2024, respectively. The total amount of the parent project and the first additional financing is US $66.7 million. The project has disbursed 70.45 percent of the total funds as of August 20, 2024, and retroactively financed 100 percent of the salaries of eligible education and health employees. The parent project and the first additional financing were both subject to an audit and a payroll/Acceptable Use Policy verification exercise. Both engagements have been concluded, with a clean audit opinion being issued on July 22, 2024, a management letter, and a payroll/AUP report signed and released on July 25, 2024, that include minimal and immaterial observations, addressed by the Project Implementation Unit (PIU) management.  he PURSE contribution to the PEFF was disbursed on September 3, 2024. The first tranche of the AF 2, amounting to 4 T $50m, was disbursed to the PA in October, with the second tranche expected to be disbursed in December. Key Results and Updates 15 Technical Assistance - Public Financial Management Improvement (P505800) Approval Date: August 30, 2024 Closing Date: September 30, 2026 Total Financing: US $2.3 million (including ESPERE II: EUR 2.2 million) Objective: To improve public financial management, procurement management, and data use in the Palestinian Authority. The ASA will help improve public financial management (PFM), procurement management, and data use in the PA. An additional objective is to build related capacity in the Ministry of Finance (MOF) and other ministries and municipalities. The ASA will provide technical assistance to address some of the weaknesses and risks in the PFM system by: (i) improving budget expenditure management and control, (ii)  improving financial accountability of the PFM system, (iii) enhancing revenue mobilization, (iv) improving public procurement management and, (v) closing critical data gaps and modernizing statistics production. It will support these activities by: • Mobilizing Bank expertise not readily available to the Project Management Unit (PMU) or HCPPP, particularly for issues which require highly specialized skills in relation with the recipient-executed program devoted to the MoF and the other implementing agencies; and • Providing oversight of the reform agenda in areas supported by the project and enhancing coordination with the work of other donors. 4.2. Pillar II: Human Capital and Service Delivery SERATAC – (Supporting an Education Reform Agenda for Improving Teaching, Assessment and Career Pathways) (P177299) – Implementation Support SERATAC Approval Date: March 25, 2022 Phase I Closing Date: December 30, 2026 SERATAC Implementation Support Approval Date: August 3, 2022 Closing date: April 29, 2024 PURSE MDTF Grant Financing: US$200,000 Objective: To provide ongoing support to the Ministry of Education for the high-quality implementation of SERATAC. SERATAC Multi-phase Programmatic Approach (MPA) aims to improve the education outcomes of primary and secondary students in the WB&G and introduce new student pathways leading to tertiary education. The Ministry of Education (MoE) requested the World Bank to support the implementation of SERATAC through technical assistance (TA) and policy advice. Accordingly, PURSE provided US$200,000 which helped support the following activities, despite the challenging operating environment: • Component 1. Building Strong Foundations for Learning and Wellbeing: An Arabic reading screening check for the early grades was successfully piloted in grades 1 and 2. Based on the pilot results, the MoE intends to make minor adjustments to the test design and proceed with a gradual roll out at the national level. In addition, a large tender has been launched for the competitive selection of an international university to support the implementation of teacher training activities under this component. 16 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report • Component 2. Harnessing Technology to Improve STEM Learning: A situational analysis of STEM (Science, Technology, Engineering and Mathematics) education has been completed to inform the development of a national framework that will guide STEM teaching and learning. Further, an inventory of available STEM equipment in lower secondary schools in the West Bank is has been completed. • Component 3. Strengthening the Student Learning Assessment System: A series of 15 capacity building workshops and technical working sessions have been conducted to support the MoE’s Assessment Department in the analysis and reporting of results from the WB&G’s first-ever participation in the Program for International Student Assessment (PISA) 2022. The national report has been published on the MoE’s website and disseminated to development partners of the Education Sector Working Group. Health System Efficiency and Resilience Project (P180263) Approval Date: April 7, 2023 Closing Date: May 31, 2028 Total Financing: US$45 million including a US$21.2 million financing gap and PURSE MDTF Grant Financing: US$4 million PURSE MDTF Implementation Support: US$200,000 Progress towards PDO: l Satisfactory (-) Implementation Progress: l Satisfactory (-) Disbursement Ratio: 27% Objective: To support the Palestinian Authority in improving the resilience and efficiency of the health system, and in case of an Eligible Crisis or Emergency, respond promptly and effectively to it. Following October 2023, US$8.3 million of the TFGWB financing for the of the Health System Efficiency and Resilience Project (HSERP) was allocated to emergency response, as the originally planned activities under the project were no longer feasible. In December 2023, the team received US$4 million from PURSE through a Norwegian contribution, which became effective on June 4, 2024, and will be utilized for the procurement or maintenance of medical equipment to strengthen public primary health and hospital facility capacity in West Bank. These investments will target conditions that are the most frequently referred to private hospitals, helping improve access and reduce expenditures. To determine priority locations and needs, a facility-level medical equipment and service availability capacity assessment has been conducted, funded by the PURSE MDTF implementation support. Data analysis is underway, and a service availability and a prioritized investment plan will be finalized by early November 2024. By early December 2024, the Ministry of Health will have launched procurement through local suppliers in West Bank for the totality of the financing. Key Results and Updates 17 CLOSED TA ACTIVITY Digital WB&G Project (P174355) – Implementation Support Digital WB&G Project Approval Date: March 26, 2021 Closing Date: December 30, 2026 Total Project Financing: US$20 million Digital WB&G Implementation Support Closing date: June 30, 2024 PURSE MDTF Financing: US$27,500 The technical assistance from the PURSE grant has supported moderate advances in the following areas of the Digital West Bank and Gaza Project: enabling legal and regulatory environment for digital economy, implementing digital infrastructure solutions for emergency response, and fostering user-centered e-service delivery. This progress has been complemented by a knowledge exchange with the Government of Jordan to help inform strategic, technical and operational questions related to digitalization of service delivery. Challenges in the project include staff turnover in the project management unit (PMU), delays in the operationalization of the Telecommunications Regulatory Authority (TRA), and procurement and contract management delays. Next steps include completion of the project’s mid-term review, increase of the project rating through TRA operationalization and increased pace of implementation, including boosting the PMU capacity to manage procurement/contracting 4.3. Pillar III: Private Sector Development and Job Generation Technology For Youth And Jobs (Techstart) (P172571) Project Approval Date: December 6, 2020 Project Closing Date: October 30, 2028 Total Grant Financing: US$30.6 million (including: PURSE: US$5.3 million; ESPERE: EUR6.8 million) Progress towards PDO: l Moderately Satisfactory (-) Implementation Progress: l Moderately Satisfactory (-) Disbursement Ratio: 56% Objective: To increase economic opportunities for IT service firms in the West Bank and Gaza. The Upskill Program focuses on helping IT firms (including tech and tech enabled startups) upskill their workforce to scale up their business, increase their opportunities for growth, and to attract new local and international clients. Up until June 2024, UpSkill has benefited 61 companies by helping train 497 trainees in niche technologies to advance workstreams and fulfil IT contracts. The project also launched Advisory Services on Managerial Capabilities, currently in the inception stage. The project also launched the procurement of services to implement an IT and Gender Needs Assessment; the contract was awarded to the service provider in November 2023. The Pioneer program focuses on strengthening the competitiveness of the Palestinian IT sector through financing initial costs for establishment in the West Bank and Gaza. It has awarded 16 grants up until Q1 2024 helping 7 firms establish new IT operations and assisting 9 firms to upgrade their IT business infrastructure. The project has also launched and nearly concluded the recruitment of a lead to advance the implementation of work related to a) awareness raising and international market linkages and b) the promotion and facilitation of foreign direct investment. The project is currently assessing the impact of conflict on IT companies and will adjust interventions as needed. 18 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report Box 1: TechStart Results Story With the support of TechStart, Orion VLSI technologies has become the first Palestinian Company to specialize in intricate chip design. Techstart supported Orion to hire experts and enable its first operations, while the company focused on investing in training programs across VLSI design cycle. The company is now growing rapidly, from employing six engineers in 2023 to 42 by mid-2024. This growth has been instrumental in showcasing the potential of the Palestinian IT sector in developing and advancing workstreams in R&D and chip design. Majd Shath, Orion’s business development manager, said: “Pioneer [a program under TechStart] gave us the opportunity to invest in building the capacities of fresh Computer engineers and Electrical Engineers graduates and equip them with the know-how in all aspects of the VLSI Design cycle. This has been a game-changer for us.” Innovative Private Sector Development Project II (P181354) Approval Date: September 20, 2023 Closing Date: December 31, 2028 Total Grant Financing: US$14.5 million (including: ESPERE: EUR3.7 million) Progress towards PDO: l Satisfactory (-) Implementation Progress: l Satisfactory (-) Disbursement Ratio: 10% Objective: To improve economic opportunities for tech enabled startups and innovative Small and Midsize Enterprises (SMEs), and individuals in the digital economy in the West Bank and Gaza. For the purposes of this project, economic opportunities include access to the following resources: (i) early-stage finance, (ii) market access activities, (iii) mentorship, (iv) skills enhancement training, (v) employment matchmaking, and (vi) streamlined formal business registration. The project is still in its first year of operations having been approved in September 2023. Under subcomponent 1.1: Improving Market Linkages, the Nexus program aims to support firms to attend awareness event targeting potential businesses, participate in business-to-business networking to gain contracts, and receive market access grants to finance market access service in regional markets. To date, Nexus supported 8 startups to attend the London Tech Week in June 2024 and 14 startups to attend Gitex in Dubai in October 2024, one of the world’s largest and most influential tech events. The project is still in the process of redesigning and relaunching project components, including Co-Investment, and the Angel Investment Development Program. The program also supports Gaza Gateway (GGateway) to enhance its legal and organizational structures to become a sustainable social enterprise, and resume operations and trainings in the West Bank after the eruption of the conflict in Gaza. Key Results and Updates 19 CLOSED TA ACTIVITY TechStart Technical Assistance (TA) Approval Date: October 13, 2023 Closing Date: February 28, 2024 Total Financing: US$352,222 from PURSE Objective: The funding supported technical assistance to the implementation of the Bank-financed TechStart project by leveraging its global expertise and experience in fragile and conflict affected countries, r to address challenges that may emerge during implementation, given the project’s technical sophisticationand the unpredictability of WB&G context. Throughout the fiscal year, World Bank staff continued to offer TA to the Project Implementation Agency DAI through bi-weekly project check-ins on active components, bi-annual implementation supervision missions (the latest too place in June 2024), regular monitoring of project results, support to the implementation of environmental and social safeguards, as well as oversight of financial and procurement functions. Technical assistance is also provided to DAI to improve project reporting and communications, enhance project outreach and exposure through active stakeholder engagement, and quality assuring products such as terms of references, scope of work, and requests for proposals for acquiring service providers. Additionally, the World Bank is leveraging global expertise in areas such as digital development, investment promotion, and startup management and operations to ensure that the project is adequately geared to support the Palestinian IT ecosystem and its stakeholders. ONGOING TA ACTIVITY Business Regulation for Investment, Digitalization, Governance and Entrepreneurship (BRIDGE) TA (P178421) Approval Date: July 23, 2022 Closing Date: April 24, 2025 Total Financing: US$3.2 million (including PURSE: US$0.4 million; ESPERE: EUR2.8 million) Objective: To promote inclusive, sustainable private sector led growth in the WB&G through business regulation reforms, improved governance, enhanced transparency and strengthened Government to Businesses service delivery. In FY24 the team prioritized the company law implementation and the launch of the minimum viable product of the Automated Business Registry System (ABRS). On the company law implementation, the key activities included: i) supporting the Ministry of National Economy (MoNE) in developing a new regulation on the electronic business registration procedures, and ii) developing model articles of association for the general and limited partnerships. The preparatory activities for ABRS included developing: i) Standard Operating Procedures for all registration procedures in the Companies Registry, ii) new output documents for the digitalization of the Companies Registry’s decisions, iii) communication diagrams for the ABRS integrations with e-Government and Tax systems, and (iv) workshop in May 2023 with key stakeholders (MONE, the Ministry of Communications and Information Technology (MTIT), and the Ministry of Finance (MoF)) for developing a roadmap for launching the ABRS in fourth quarter 2024. Since the launch on 20 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report September 15 until October 29, the ABRS online portal shows 222 companies registered through ABRS. Moreover, BRIDGE completed an initial assessment of the options for implementing a mediation function in the Companies Registry. Implementation for the other activities (on licensing and inspections reforms), was initiated with a diagnostic in July 2023, however the team was not able to complete the diagnostic due to the ongoing conflict. The team is exploring options to resume activities in these areas in FY25. West Bank and Gaza Financial Sector Modernization ASA (P169932 and P505031) Concept Approval Date: February 15, 2019 Completion Date: March 4, 2027 Total Financing: EUR 275,000 from ESPERE (as of August 2024)* Objective: To contribute to the stability, accessibility, and sustainable development of the financial sector in the West Bank and Gaza by increasing safety, efficiency, and inclusivity. *Note: The total size of this ASA is expected to be around EUR 1 million, but so far funding requests have been committed for EUR 275,000. The World Bank team conducted several rounds of consultations with PMA counterparts and private sector representatives to identify priority financial sector needs and initiated the following activities: • As the cash scarcity problem in Gaza continues to escalate, the World Bank is providing technical assistance to the PMA as they facilitate access to new payment modalities for humanitarian cash assistance in Gaza, in coordination with humanitarian stakeholders. These methods utilize existing channels such as Payment Service Providers (PSPs) and existing national payment infrastructure including the recently launched Instant Payments System “iBuraq”, developed by the PMA to facilitate interoperability between banks and PSPs. • The World Bank continues providing capacity building to the PMA on cyber security supervisory framework, including information technology supervisory framework and risk based supervision methodologies. • The World Bank team engaged the PMA on a proposed revision to the existing regulatory framework for payment, with the objective of streamlining the sector’s regulatory approach in line with international best practice. Pending a green light from PMA senior management, the Bank and PMA counterparts will identify overall objectives and concrete deliverables going forward. • Building on previous assistance to the PMA on developing a Financial Digital ID and electronic Know Your Customer protocols, the World Bank team continues to support the scope of work between PMA and the vendor and on areas of cyber security, payments, and consumer protection. The volatile environment relating to digital financial services in Gaza is a risk to implementation. Therefore, working with PMA on providing contactless solutions will mitigate some of this risk. Key Results and Updates 21 4.4. Pillar IV: Protection to the Poor and At-Risk Population Emergency Social Protection and Jobs (SPJ) Covid-19 Response Project (P174078) Project Approval Date: July 27, 2020 Project Closing Date: December 31, 2025 (Extended) Total Grant Financing: US$49.4 million (including: TFGWB: US$40 million; PURSE: US$4.8 million) Progress towards PDO: l Satisfactory (-) Implementation Progress: l Satisfactory (-) Disbursement Ratio: 100% Objective:. To provide cash and/or in-kind emergency support and short-term employment opportunities to vulnerable populations in West Bank and Gaza affected by emergency shocks including COVID-19 and in case of an eligible crisis or emergency, respond to it promptly and effectively. Following October 7, 2023, a second Additional Financing (AF2) in the amount of US$10 million was approved on December 6, 2023, bringing the total amount of the project to US$49.4 million: US$30million from the TFGWB under the parent project, US$4.8million from the PURSE MDTF and US$4.6 million from the Middle East and North Africa Multi-Donor Trust Fund (MNA MDTF) under the first Additional Financing (AF1) and lastly US$10 million from the TFGWB under AF2. AF2, implemented by MoF with the support of the World Food Program (WFP) aims to respond to the acute emergency situation in Gaza resulting from the October 2023 conflict. Along with the approval of AF2, the parent project was also restructured to scale up its focus on the provision of in-kind support (food parcels) and extend its closing date to December 31, 2025 Under the parent project and the first AF, 90,225 households received cash support (one-time emergency payment), exceeding the target of 77,715. Forty-two percent of the beneficiaries were female headed households, against an end target of 50%. The project also helped close the financing of the cash- transfer program funding gap, through reaching 29,156 households, slightly exceeding the target of 29,037.​​​​​​Temporary jobs were also created for 3,940 beneficiaries in the West Bank, 85% of which were female beneficiaries, against a target of 50%. Under the AF2, the US$10 million has been fully disbursed, benefiting 1,006,750 people with one-time food parcels consisting mainly of canned food and wheat flour 1. Given the security situation on the ground, WFP reported several implementation challenges including security checks obstructing the entry of trucks to Gaza and looting incidents. To address these challenges, WFP and other UN agencies adopted a few adaptation measures, including the use of multiple access points, engaging in a bread program in collaboration with the bakery association and distributing hot meals. 22 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report 4.5. ASAs on Cross-Cutting Themes COMPLETED TA ACTIVITY West Bank & Gaza Country Climate and Development Report (P179452) * Approval Date: December 8, 2022 Completion Date: December 20, 2023 Total Financing: US$475,000 (including, PID:US$300,000) Objective: To identify and prioritize development interventions that are climate-responsive and have a high potential for impact in terms of bridging existing development gaps and strengthening resilience. *Note: More details on the WB&G CCDR are given in Chapter 4 (Cross-cutting Themes). Following extensive consultations with key stakeholders, the final WB&G CCDR was finalized in early September 2023. The World Bank team publicly disseminated it in November 2023, during COP28, and now aims to organize a national launch if the situation allows. The report analyzes the impacts of climate change and presents policy options; more details are provided in section 5.3 below. ONGOING TA ACTIVITY Social Inclusion and Citizen Engagement Programmatic ASA (P177796)* Approval Date: February 8, 2022 Completion Date: March 13, 2025 Total Financing: US$335,000 (including PID: US$300,000; PURSE: US$35,000) Objective: To provide strategic support for and strengthen the WB&G program’s approach on socially sustainable and inclusive development with a focus on vulnerable groups, gender and gender-based violence, and citizen engagement and social accountability across the PID-MDTF and other select sectors. The workplan for FY24 was significantly changed due to the conflict in Gaza. While some planned activities continued (e.g. gap analysis of national laws and systems for environmental and social risk management in relation to the World Bank’s Environmental and Social Framework (ESF), social inclusion portfolio assessment), other planned activities were dropped (e.g. assessment of harassment in the digital realm, trainings on gender-based violence and harassment issues for projects in Gaza). Instead, new activities that were better suited to the emerging context in Gaza were implemented, including consultations with vulnerable people (women, people with disabilities, elderly, children, youth) and representative civil society organizations on the impacts of the conflict and the needs and priorities for recovery. A total of 23 interviews were conducted with citizens in southern Gaza, and 10 interviews were conducted with CSOs representing vulnerable groups. Drafts of the gap analysis, across all standards, and portfolio assessment (including PURSE projects) have been submitted for review and will be finalized during FY25. More details about gender and citizen engagement activities can be found in sections 4.1 and 4.2 below. Key Results and Updates 23 5 The PURSE portfolio contributes to the cross-cutting themes of gender, citizen engagement, climate resilience, and leveraging digital technologies. 5.1. Gender Social Inclusion and Citizen Engagement ASA: Focus groups discussions and interviews were conducted with representatives of women-led organizations and women in select shelters/camps on the impact of the conflict and immediate needs and priorities for relief and recovery. Findings from these discussions informed the Interim Damage Assessment, and similar consultations will inform the preparation of the IRDNA and CRF. Additionally, training on harassment in the workplace was piloted in the West Bank and will be rolled out to other Cross-Cutting projects. Under Pillar I (Macro-Fiscal Stability and Public Financial Themes Management), DPG-13 aimed to increase the number of women- owned businesses accessing microfinance institutions. To date 6,910 women-owned business have accessed microfinance institutions; however, the Palestine Monetary Authority (PMA) has reported that the rate of progress has slowed as a result of the conflict, and the end target may not be fully achieved by June 2024. Under Pillar II (Human Capital Investment and Service Delivery), the Digital WB&G Project provides technical training and workshops (for key selected staff to build the required technical capacity to successfully execute the regulatory and operational functions required for the effective operation of the Telecommunications and Information Technology Regulatory Authority and Certification Authority. Half of staff trained under subcomponent will be women, which would help enhance women’s competitiveness for technical roles and positions of leadership. This can be filled by hiring new staff or upskilling existing employees. Under Pillar IV (Protection to the Poor and at-Risk Population), building on the successful gender approach of the Cash for Work (C4W) in the Gaza intervention, the SPJ COVID-19 Emergency Response Project pays specific attention to ensuring that young women have equal access to C4W opportunities in the West Bank through the following actions: (a) requiring that at least half the beneficiaries of each sub‐ project are women; (b) focusing the C4W on social and health services which appeal to women; (c) ensuring that information about C4W opportunities in sub-projects is communicated in a way that will reach women and men, equally; and (d) offering a transportation stipend to ease mobility constraints. 24 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report 5.2. Citizen Engagement Social Inclusion and Citizen Engagement ASA: Firstly, technical support was provided to projects (e.g., private sector, health) for strengthening grievance mechanisms including connection with referral mechanisms for any complaints regarding sexual exploitation and abuse/sexual harassment. Projects were provided a list of NGOs providing support services for GBV survivors to help identify organizations in their project areas that can provide referral services in case of any complaints. Projects were also supported to establish contact with the service providers to inform them that if agreeable to survivors, complaints will be referred to them. It was also ensured that information about the complaint mechanism was available to project beneficiaries. Secondly, interviews have been conducted with representative organizations and marginalized people, including the elderly, people with disabilities, youth, and people who have been displaced and are living in shelters and camps in Gaza on the impact of the conflict, needs and priorities for relief and recovery. A total of 23 interviews with citizens and 11 with representative organizations, across various categories were conducted. Findings from these discussions were reflected in the IDA and similar consultations will inform the IRDNA and CRF. Under Pillar II (Human Capital Investment and Service Delivery), HSERP includes activities to strengthen citizen engagement such as involvement of civil society, consultations, the use of national multistakeholder committees with civil society representatives and establishing a grievance redress mechanism for the project. Citizen engagement is tracked through a beneficiary feedback indicator “Patients that are satisfied with the treatment received in hospitals,” which will track beneficiary satisfaction amongst those utilizing hospital services In Pillar III (Private Sector Development and Job Generation), citizen engagement has a central role in IPSD II. During the original IPSD project, it became clear that for the project to achieve its objectives, the quality of services provided by contractors (including mentoring and building skills) must be high and must be perceived to be high by beneficiaries. It is therefore essential to collect feedback on beneficiary satisfaction with these services. Surveys will be developed across different project activities to measure beneficiary individuals’ feedback. A simple application or survey will be developed to solicit beneficiary feedback at the conclusion of the intervention, which can complement other outcome-oriented indicators. These data will be integrated periodically (and no less frequently than once per year after intervention completion) into World Bank implementation support missions and may also feed into decisions on contract renewals of service providers. Under Pillar IV (Protection to the Poor and at-Risk Population), the SPJ COVID-19 Emergency Response Project has effective dissemination, grievance, and feedback mechanisms and the second AF adopts conflict-appropriate mechanisms for beneficiary feedback. The project uses a pre-existing Grievance Redress Mechanism (GRM) which has proven to be scalable and functional. Benefiting from its continuous and long-standing validation, the existing GRM is transparent, has strong accountability mechanisms including a citizen engagement component, and has been rated highly effective and efficient in handling grievances and communicating with the public. Through its unified portal gateway, the Ministry of Social Development (MoSD) has made the public platform available for citizens to fully engage through a two- way communication channel. The Ministry also maintains open channels with civil society organizations, beneficiaries, and other stakeholders to foster the complementarity of the program. In addition, MoSD currently discloses its citizen budget through the GRM. Cross-Cutting Themes 25 5.3. Climate Resilience CCDR: The WB&G CCDR assesses the impact of climate change by setting out three scenarios which reflect different levels of climate action ambition, varying degrees of cooperation by the Government of Israel and the impact on growth paths of the Palestinian economy. The report builds on sector level analyses focused on the water-energy-food nexus, urban development and the macroeconomic framework and is informed by extensive stakeholder consultations and the Palestinian national climate priorities. Importantly, this CCDR features the health and social protection sectors ‘horizontally’ in its approach, reflecting the critical importance of service provision and human capital in a fragile context like the WB&G. The CCDR also calls for greater access to finance, a dynamic private sector participation, and a whole of government and society approach to implementation. Under Pillar I (Macro-Fiscal Stability and Public Financial Management), DPG-12 successfully supported the implementation of a measurement, reporting and verification (MRV) system to keep track of greenhouse gas emissions. This is relevant as a first step toward the objective of accelerating the greening of the economy, calling for the MRV software to be customized according to the Palestinian context at the Environment Quality Authority (EQA) and generating statistical summaries and analytics. This target was achieved as the MRV is functional and generating reports. The MRV system has been successfully housed in the EQA’s servers and customized according to the Palestinian context, leveraging the experience of the World Bank in Jordan that uses a similar system. Memoranda of understanding have been signed between the EQA and seven governmental partners and entities to ensure the efficient flow of information to the MRV system. In March 2024, the MRV system was in the pilot phase of data processing at the Palestinian Energy and Natural Resources Authority (PENRA) collecting and processing data on energy consumption. Emissions are reported annually in the MRV system and the data generated used by the Palestinian Central Bureau of Statistics to conduct an inventory of greenhouse gas emissions in the Palestinian territories. Under Pillar II (Human Capital Investment and Service Delivery), HSERP seeks to increase the resilience of self-construction against climate-induced risks by improving the capacity of service delivery at all levels, improving access to scaled-up services across the West Bank and Gaza, which would enable the health system to ensure continued access to quality services despite the system’s vulnerability to shocks. Under Pillar IV (Protection to the Poor and at-Risk Population), the SPJ COVID-19 Emergency Response Project, along with its second AF, is consistent with the 2021 updated Palestinian Nationally Determined Contributions, which state the key climate goal of reducing climate vulnerabilities and include food, health, and water among the priority and vulnerable sectors. In particular, the second AF actively contributes to the food security of people in Gaza. 26 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report 5.4. Digital Technology Under Pillar I (Macro-Fiscal Stability and Public Financial Management), the fifth prior action for DPG-13 was for the Palestine Monetary Authority to advance the digital transformation agenda in the financial sector and enhanced public confidence in electronic transactions by enacting a national payments law regulating the use of e-money and strengthening the PMA’s authority over entities providing e-money services. The associated target was for cashless transactions to increase by 150 percent from June, 2022 to December 2024. To date, cashless transactions have increased by 106 percent. Under Pillar II (Human Capital Investment and Service Delivery), all components of the Digital WB&G project address issues of digital technology. The project aims to: a) improve quality of high-speed broadband services in selected areas; and (b) enable development of selected e-services for response, recovery, and resilience from shocks, such as COVID-19. Pillar III (Private Sector Development and Job Generation): Leveraging digital technologies for the benefit of the Palestinian economy is central to the purpose of both TechStart and IPSD II. TechStart is leveraging digital technologies to boost the WB&G economy by increasing economic opportunities for IT service firms, and to date has a) helped 61 companies train 471 employees and b) supported 16 firms to establish new IT operations or upgrade their IT business infrastructure. IPSD II has supported eight tech- enabled startups to attend the London Tech Week in June 2024 to help them network to gain contracts and access to regional markets. Cross-Cutting Themes 27 6 Financial Overview 6.1. PURSE Financials The World Bank extends its gratitude to five development partners, namely the EU, France, Norway, Switzerland, and the UK for their substantial contributions to the PURSE MDTF and its associated trust funds, ESPERE I and II. As of September 30, 20245, a total of US$146 million has been pledged to PURSE and ESPEREs, since the PURSE umbrella program’s inception in June 2021. This chapter provides a financial overview of the PURSE MDTF; the following chapter presents a financial overview of ESPERE and ESPERE II. PLEDGES As of September 30, 2024, a total of US$126.0 million has been pledged to PURSE since June 2021 from four development partners (DPs): France, Norway, Switzerland, and the United Kingdom. Of these US$126.0 million in pledged funds, US$123.4 million have already been paid in. Pledges to PURSE MDTF during FY24 amounted to some US$39.1 million: US$22.0 million from Norway and US$17.1 million from France. In early FY25, the UK became the most recent DP to join PURSE, with a pledge of GBP 10 million (equivalent to US$13.0 million) in July 2024.  he financial data presented in this section is as of August 31 unless otherwise 5 T stated. Although the reporting period ended on June 30, data has been provided up to August 31 in order to provide more up-to-date information. 28 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report Table 1: PURSE Trust Fund Financial Contributions as of September 30, 2024 Pledged to Date - Total (in millions) Pledged Paid-in to date Receivables Pledge Pledge Pledge Contributors Currency Currency USD Currency USD Currency USD France EUR 32,000,000 3,5014,800 32,000,000 35,014,800 0 0 Norway NOK 710,000,000 71,784,643 710,000,000 71,784,643 0 0 Switzerland USD 6,222,222 6,222,222 3,650,000 3,650,000 2,572,222 2,572,222 United Kingdom GBP 10,000,000 12,985,000 10,000,000 12,985,000 0 0 Total (USD) — 126,006,665 — 123,434,443 — 2,572,222 COMMITMENTS 6 PURSE funding in the amount of US$112.9 million has been committed for co-financing, 97 percent of which is in development policy grants and investment operations. The largest share (87%) of financing, around US$98.5 million, has been committed to Pillar I (Macro-fiscal Stability and Public Financial Management), namely DPGs 11, 12 and 13, and the PEFF AF. The activity for Pillar IV (Social Protection to the Poor and at-risk Population) follows with an approximate total of US$4.8 million—4 percent of financing; US$4 million (4% of financing) has been committed to HSERP under Pillar II; and some US$1.6 million, (1% of total financing), has been committed to private sector activities under Pillar III (Financial and Private Sector Development and Job generation). Some US$1.0 million — 1 percent of committed funds — has been committed to the Bank-executed Advisory Services and Analytics (ASA) window. These funds have been committed to eight activities: US$49,950 to the Wage Bill Note; US$45,000 to Measuring Multi-Dimensional Poverty in the PECS 2022/2023 national survey; US$49,851 on Bringing a Gender Lens to the impact of fiscal policy and social programs; US$35,000 for the Social Inclusion and Citizen Engagement ASA; US$345,162 for the TechStart TA; US$21,662 for Human Capital and Climate Change in Palestine; US$417,078 for Supporting Companies Law Implementation through Bridge; US$20,000 for Macroeconomic and Climate Change Analysis supporting the WB&G CCDR; and US$48,000 for the 2024 RDNA and Recovery Support. To date, a Program Management and Administration (PM&A) commitment of US$2.5 million has been made, which is less than 2 percent of the total pledged amount. In addition, US$425,266 has been committed to the implementation support window until August 2025; US$198,053 for SERATAC Implementation Support, US$200,000 for Health System Efficiency and Resilience Project Implementation Support, and US$27,213 for Digital Project Implementation Support.  ommitments are funds which have been assigned to a certain project after the relevant Grant Fund Requests (GFRs) are 6 C submitted and approved, contingent upon the funds available in trustee accounts. In contrast, allocations are funds which are currently intended to go to a certain project, but about which a final decision has not yet been made; allocations are therefore provisional and subject to change depending on the actual amount of funds paid in. Financial Overview 29 ALLOCATIONS Total PURSE MDTF funding allocations amount to US$6.7 million. Of this amount, US$3.3 million has been allocated to TechStart AF, US$500,000 to the Gaza and West Bank RDNA & CRF, and US$1.9 million to PURSE PM&A. Additionally, US$1 million has been allocated to a new TA facility, which aims to support the Ministry of Planning and International Cooperation (MoPIC) in its efforts related to the Gaza Reconstruction, Recovery and Development Planning, as well as Public-Private Partnership, reform agenda, inter-ministerial coordination, aid management and portfolio monitoring. Table 2: PURSE MDTF Commitments and Allocations (US$) as of September 30, 2024 Commitments & Allocations (US$) Pledged 126,006,665 Funds available for grants 123,434,443 PURSE MDTF Commitments   Commitments to Active (and Pending) Activities 78,494,096 Pillar I: Macro-fiscal Stability and Public Financial Management 98,503,201 Pillar II: Human Capital and Service Delivery 4,000,000 Pillar III: Financial and Private Sector Development and Job Generation 1,614,772 Pillar IV: Social Protection to the Poor and at-risk Population 4,809,100 Bank-executed Advisory Services and Analytics 1,031,704 Program Management and Administration (PM&A) (up to 5%) 2,484,810 Implementation Support 425,266 Total Committed  112,868,853 PURSE MDTF Allocations Pillar III: Financial and Private Sector Development and Job Generation 3,293,991 TechStart AF 3,293,991 Bank-executed TA 1,500,000 TA Facility 1,000,000 Gaza & West Bank RDNA & CRF 500,000 PM&A and Implementation Support 1,890,257 PM&A (up to 5%) 1,890,257 Total Allocated   6,684,248 TF Fee (5-2%)   [Committed] Trust Fund Fee 5,170,097 [Allocated] Trust Fund Fee 358,590 Trust Fund Fee 3,825,420 Trust Fund Fee 5,528,687 30 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report 6.2. ESPERE Financials The EC has pledged a total of EUR 18.7 million to ESPERE Associated Trust Funds to PURSE, which includes contributions to ESPERE I (EUR 9 million) and ESPERE II (EUR 9.7 million). Like other TF arrangements, a comprehensive unaudited financial report can be accessed via the Development Partners Center portal. 6.2.1. ESPERE I Financials PLEDGES Since October 2022, a total of EUR 9 million (US$9.8 million) has been pledged to ESPERE I by the EC. Of these funds, EUR 7.5 million (US$8.1 million) has already been paid in. Table 3: ESPERE I Financial Contributions as of September 30, 2024 Pledged to Date - Total (in millions) Pledged Paid-in to date Receivables Trustee Fund Currency EUR USD EUR USD EUR USD ESPERE I EUR 9.0 9.5 7.5 8.1 1.5 1.6 Total 9.0 9.5 7.5 8.1 1.5 1.6 COMMITMENTS AND ALLOCATIONS ESPERE I funding in the amount of EUR 7.3 million has been committed for co-financing. Of this amount, EUR 3.7 million has been committed to IPSD II under Pillar 3 (Financial and Private Sector Development and Job Generation). Additionally, a total of EUR 2.95 million has been committed to three Bank-executed activities: EUR 2.35 million for BRDIGE TA, EUR 275,000 for the Financial Sector Modernization TA, and EUR 320,000 for ESPERE RDNA Support. The PM&A commitment of EUR 300,000 has been made, which represents 3.3 percent of the total pledged amount for ESPERE I. Total ESPERE I funding allocations amount to EUR 150,000, which has been allocated to ESPERE I PM&A, bringing the total for PM&A allocation to 5 percent of pledged funds. Financial Overview 31 Table 4: ESPERE I Commitments and Allocations (EUR) as of September 30, 2024 Pledged 9,000,000 Funds available for grants 7,500,000 ESPERE I Commitments   Commitments to Active (and Pending) Activities Pillar III: Financial and Private Sector Development and Job Generation 3,702,675 Bank-executed Advisory Services and Analytics 2,945,096 Program Management and Administration (PM&A) (up to 5%) 300,000 Total Committed  6,947,771 ESPERE I Allocations Bank-executed ASA 725,000 Financial Sector Modernization PASA 725,000 PM&A and Implementation Support 150,000 ESPERE I PM&A and Implementation Support 150,000 Total Allocated 875,000 TF Fee (5-2%) [Committed] Trust Fund Fee 503,134 [Allocated] Trust Fund Fee 104,988 Trust Fund Fee 608,122 6.2.2. ESPERE II Financials PLEDGES Since July 2023, a total of EUR 9.7 million (US$10.4 million) has been pledged to ESPERE II by the EC. Of these funds, EUR 4.25 million (US$4.6 million) has already been paid in. During FY24, the EC made an additional contribution of EUR 2.2 million to enhance public financial management, procurement management, and data use in the PA, while also building related capacity in the MoF and other ministries. Table 5: ESPERE II Financial Contributions as of August 31, 2024 Pledged to Date - Total (in millions) Pledged Paid-in to date Receivables Trustee Fund Currency EUR USD EUR USD EUR USD ESPERE II EUR 9.7 10.4 4.25 4.6 5.45 5.85 Total 9.7 10.4 4.25 4.6 5.45 5.85 32 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report COMMITMENT AND ALLOCATIONS Total ESPERE II funding commitments amount to EUR 3.9 million, including EUR 2.9 million for the Techstart AF under Pillar III, EUR 843,000 for the Public Financial Management Improvement ASA, and EUR 163,000 for PM&A. In addition, total allocations amount to EUR 5.2 million; with EUR 3.9 million allocated to the Techstart AF under Pillar III, EUR 1 million for the PFMI ASA, and EUR 322,500 for ESPERE II PM&A, bringing the total for PM&A allocation to around 5 percent of pledged funds. Table 6: ESPERE II Commitments and Allocations (EUR) as of September 30, 2024 Pledged 9,700,000 Funds available for grants 4,250,000 ESPERE II Commitments   Commitments to Active (and Pending) Activities 3,927,262 Pillar III: Financial and Private Sector Development and Job Generation 2,921,905 Bank-executed Advisory Services and Analytics 842,857 Program Management and Administration (PM&A) (up to 5%) 300,000 Total Committed  3,927,262 ESPERE II Allocations Pillar 3 3,863,810 TechStart AF 3,863,810 Bank-executed ASA 1,011,430 PFMI ASA 1,011,430 PM&A and Implementation Support 322,500 ESPERE II PM&A 322,500 Total Allocated 5,197,740 TF Fee (5-2%) [Committed] Trust Fund Fee 75,000 [Allocated] Trust Fund Fee 231,890 Trust Fund Fee 306,890 Financial Overview 33 7 Looking forward, it is certain that the recovery and reconstruction of Gaza will be a crucial priority and require a vast mobilization of resources. The World Bank’s preparations for this are described in chapter three, and include conducting the I-RDNA, preparing the CRF, and restructuring PURSE to create a financing and coordinating mechanism. Sector- specific priorities for both Gaza and the West Bank in the current context are outlined below. Under PURSE Pillar I, it is crucial to support the new Government and its reform program, which aims, among other things, to strengthen Palestinian institutions and improve services to citizens. With this in mind and subject to Board approval, the World Bank aims to restart the use of Development Policy Grants (DPG) as soon as conditions allow. The DPG instrument would provide much needed budget Strategic support to the PA and help it take steps on difficult but critical reforms fully within the PA’s control, such as the consolidation of Priorities the public sector wage bill and reforms to outside medical referrals, which all constitute significant burdens on the PA’s fiscal balance. In support of the reform agenda, the World Bank is also planning and to provide, at the PA’s request, a technical assistance facility to allow for rapid deployment of specific expertise in reform design and Highlights implementation by technical experts. Pending the resumption of the DPG, the Bank will look to further scale-up the Palestinian Emergency Financing Facility, maintaining all the agreed safeguards currently in Looking force. This IPF modality is available to support the PA’s budget by retroactively paying civil service salaries in the West Bank, including Ahead in the education and health sectors. The Bank will continue to call upon development partners to co-finance either of these modalities to provide urgently needed assistance to the PA. Under Pillar II, the goal is to maintain and extend support for the education and health sectors. In health, a potential additional financing operation for the HSERP would support accelerating the pace of health care service delivery localization through interventions including but not limited to (i) additional investments to increase the availability of services that are otherwise referred in public primary health care and hospitals, and (ii) incentivizing reforms to strengthen medicine procurement, pricing and contracting arrangements for referrals, and management of health insurance. In education, the upcoming second phase of the SERATAC MPA will contribute to the implementation of the Ministry of Education’s Integrated Education Emergency Response Plan for the West Bank and Gaza. It will focus on critical recovery and resilience activities to compensate learning losses, resume schooling in Gaza, and support continuity of education services in the West Bank. 34 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report Under Pillar III, an immediate priority facing the WB&G is job creation. Other development partners are leading on the creation of short-term employment opportunities for unemployed Palestinians in the immediate term, a priority of the new PA government. However, the World Bank together with the PA will explore options for delivering cash-for-work and cash-for-services projects to deliver smaller interventions within the framework of projects in other sectors. Sectors which could be well placed for this include social protection, municipal/local government support, and solid waste management. In the short to medium term, the Bank could leverage its existing portfolio of private sector development projects, which have a particular focus on the IT sector, to create sustainable private sector jobs. In Pillar IV, a potential Social Protection Enhancement Project (SPEP) II would respond to people’s urgent and growing vulnerability in view of the ongoing conflict, and benefit the poorest households helping to build their human capital through the provision of cash transfers and the enhancement of the social protection system. A proposed component on cash transfers will likely target the poorest households and workers unemployed due to the ongoing conflict in the West Bank and contribute to government efforts to universal coverage in Gaza.  A proposed component on system strengthening will include expanding registration in and capacity of the Social Registry and launching the Case Management System. Both play critical roles in leveraging ongoing humanitarian responses toward a developmental focus to create an adaptative and shock-responsive national social protection system. The social registry and case management systems also reinforce the shift to tackling poverty in a multi-dimensional manner that goes beyond the provision of cash assistance to the poorest to address vulnerabilities and build human capital through education, health, and employment, among others. Strategic Priorities and Highlights Looking Ahead 35 ANNEX 1 Summary of Results Matrix of Active Projects (As of August 30, 2024) Unit of Results Indicators  Baseline  Previousa  Current  End Target  Measure  Pillar I: Macro-Fiscal Stability and Public Financial Management Supporting the digital foundations of the Palestinian economy, strengthening recovery and resilience post COVID-19, and improving governance and transparency (DPG-11) Number of outstanding e-wallet accounts Number 0 429,255 429,255 120,000 Percentage of female ownership of Percentage 0 28 28 20 outstanding e-wallet accounts Improving public resource management and support inclusiveness, strengthening governance in the water sector and accelerating the greening of the economy (DPG-12) Number of financial inclusion accounts issued since the new regulations were Number 0 2,096 11,580 10,080 published Number of Regional Water Utilities Number 0 0 2 2 established in the WB&G Improving the structural fiscal balance, strengthening the effectiveness of public procurement, and strengthening the integrity of the financial sector and pursuing digital transformation (DPG-13) Number of newly hired civil and security Civil: 67b personnel on the PA’s payroll as a share Percentage 221 94 Security: 50 of total exits in the same year 133 Percentage Number of cashless transactions 0 83 122 150 increase Pillar II: Human capital Investment and Service Delivery Improving teaching practices in primary grades and introducing effective career guidance for secondary school students. (SERATAC) Share of Grade 2 students reaching a Percentage 46 46 46 60 minimum oral reading fluency rate Share of Grade 8 students reaching the TIMSS Low International Benchmark in Percentage 48 48 48 55 both mathematics and science Share of Grades 1-12 students in classes Percentage 0 0 0 20 with improved instructional practices New inclusive and more flexible student pathways leading to tertiary education Yes/no No No No Yes created 36 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report Pillar III: Private Sector Development and Job Generation Increasing economic opportunities for IT service firms in the WB&G (TechStart) Additional private investment generated US$ 0 1,486,309 4,423,555 10,000,000 by benefiting firms Buyers signing new contracts with local IT service firms benefiting from project Number 0 0 104 60 activities Additional IT services jobs created Number 0 423 667 2,500 Individuals benefiting from project activities reporting satisfied or very Percentage 0 – 95 75 satisfied with support received Pillar IV: Protection to the Poor and at-Risk Population Providing cash support and short-term employment opportunities to vulnerable populations in the WB&G affected by emergency shocks including COVID-19 (Emergency SPJ COVID-19 Response Project) Number of households receiving cash Number 0 95,897 119,381 106,752 support Number of individual beneficiaries Number 0 475,870 596,905 533,760 Number of vulnerable populations Number 0 3,656 3,974 3,940 receiving cash for work from the project Vulnerable populations receiving cash for Percentage 0 85 85 50 work from the project who are female Note: a. The results in the ‘Previous’ column are those reported in the PURSE FY23 Annual Report b. Data from the MoF’s payroll department for 2023 indicates that the ratio of recruitments to exits in the civil sectors was 67 percent. However, when short-term and daily contracts are excluded, and only permanent staff are considered, the ratio drops to 49 percent—slightly below the target agreed upon in the DPG. In the security sector, the ratio of hires to exits reached 132 percent in 2023. ANNEX 1: Summary of Results Matrix of Active Projects 37 © 2024 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; email: pubrights@worldbank.org. Cover and interior design by Hanna Chang 38 The West Bank and Gaza PURSE MDTF & ESPERE I & II ATF FY24 Annual Report 1818 H Street NW Washington DC 20433 202-473-1000 www.worldbank.org