A critical period looms ahead for the future of the Palestinian entity. As U.S. President Clinton’s term in power nears its end, time is of an essence for both the Palestinian and Israeli sides in reaching a final status settlement. If diplomatic channels fail, the possibilities of a unilateral declaration of Palestinian statehood and an upsurge in violence are strong. Such occurrences could deter investment activity and erase the tangible progress the Palestinian economy has made over the past few years. However, if relative calm persists, recent moves towards greater financial accountability will have a positive effect on private investment, a key ingredient for sustained growth and development.