Upon assuming office in mid-2007, Palestinian Authority Prime Minister Salam Fayyad faced an economy in shambles. Devastated by a loss of revenues and international aid in the wake of Hamas’s 2006 electoral victory, which brought to power politicians deemed terrorists by some in the international community, average real gross domestic product per capita in the West Bank and Gaza was about 40% below its 1999 level, and the government was broke. To restart the economy and demonstrate that the Palestinian Authority could manage a socioeconomic crisis in a manner befitting a sovereign state, Fayyad and his colleagues created a detailed development plan that helped secure financial resources from international donors. With that money, the government undertook an ambitious community development program, building thousands of small-scale infrastructure projects across the West Bank. It also negotiated an easing of some of the Israeli-imposed movement restrictions that were stifling both commerce and investment. The West Bank then posted two years of double-digit economic growth and expanded, private-sector activity, but the occupation’s political challenges stymied the Fayyad government’s ultimate goal of Palestinian statehood.
Jennifer Widner, Tristan Dreisbach, and Gordon LaForge drafted this case study based on interviews conducted in Ramallah, Nablus, and Jericho in June and July 2019 and in other locations during 2019 and 2020. The case is part of a series on state building in Palestine, 2002–05 and 2007–11. Case published June 2022.