Controlling Security Spending at the Palestinian Authority 2002 - 2004


When Salam Fayyad became the Palestinian Authority’s finance minister in June 2002, one of his biggest challenges was to improve financial management in the security sector. To pay police, emergency workers, and other security personnel, commanders handed out cash to subordinates—a practice that was demeaning and that created opportunities for corruption. Procurement of equipment and supplies was neither open nor competitive and took place outside scrutiny by the finance ministry, which had little or no way of knowing where the government’s money ended up. To address the problems, Fayyad, a political outsider, had to take on a deep-rooted culture of secrecy, the reluctance of a powerful president, and resistance from some of the security officials. He began to tighten controls by working with a reform-minded legislature to incorporate procedural changes into the 2003 budget law. He then identified security service chiefs who were open to payroll reform, and he helped them become early adopters. After more than a year of private persuasion, backed by growing public discontent with corruption, Fayyad was able to implement reforms that reduced opportunities to divert funds and that increased security workers’ take-home pay. He also put security forces’ procurement activities under finance ministry oversight, thereby further limiting the risk of corruption.

Tristan Dreisbach drafted this case study based on interviews conducted in the cities of Ramallah, Nablus, and Jericho in June and July 2019 and on a series of conversations with Salam Fayyad in Princeton, New Jersey, the same year. The case is part of a series on state building in Palestine, 2002–05 and 2007–11. Case published March 2022.

Salam Fayyad
Focus Area(s)
Financial Management
Critical Tasks
Accounting systems
Budget laws & practices
Building capacity
Expenditure frameworks
Financial controls
Core Challenge
Capacity (capability traps)
Institutional traps (spoilers)
Principal-agent problem (delegation)
Reducing capture
Country of Reform
Case Studies
Tristan Dreisbach