In 2007, Salam Fayyad accepted the dual post of finance minister and prime minister in the Palestinian Authority (PA). The financial management practices he implemented during his first period as finance minister, from 2002 to 2004, had deteriorated. During the preceding two years, from November 2005 to March 2007, the government had resumed dealing largely in cash, had kept poor records of government financial transactions, and had added more employees to an already bloated public payroll. To reinstitute good practices and implement new reforms, Fayyad and his finance ministry colleagues also had to overcome challenges related to the division of the Palestinian territories into two separate areas governed by competing political parties. Fayyad relied heavily on a small group of trusted staff, delegated important responsibilities so he could also take on the demanding job of prime minister, and set clear guidelines to maximize the long-term benefits from any external technical assistance the ministry hired. Under his guidance, the ministry rehabilitated financial records and quickly created a new financial information system by adapting existing, locally built software; reformed the way the PA used commercial bank accounts to conduct its financial transactions; and filled gaps in capacity.
Tristan Dreisbach and staff drafted this case study based on multiple conversations with Salam Fayyad in Princeton, New Jersey, during 2019, as well as other interviews conducted in Ramallah, Nablus, Jericho, and Washington, D.C. the same year. The case is part of a series on state building in Palestine in 2002–05 and 2007–11. Case published June 2022.