The Palestinian Authority is suffering from a financial crisis in light of increasing Israeli restrictions, in parallel with the escalation of popular unrest in it over the impact of the devastating Israeli aggression on Gaza..
The occupied West Bank is facing a continuous deterioration in the financial situation since Israel launched its war on Gaza on October 7, with the Palestinian Authority stopping the delivery of all tax revenues that it collects on its behalf.
Declining returns
Palestinian businessmen complain of a significant decline in their revenues since the outbreak of war in Gaza.
The French Press Agency quoted Imad Rabah, who owns a plastic factory, as saying that his net profits fell by half in one year.
Under the Oslo Accords, Israel raises money for the Palestinian Authority, which exercises limited self-rule in parts of the West Bank.
But after Israel launched its devastating war in the Gaza Strip, it stopped handing over the entire amount to the Palestinian Authority, claiming that the money was being used to finance the Hamas movement.
The authority needs these amounts to pay the salaries of its employees and secure its expenses, according to officials and experts.
The situation may worsen in July, as right-wing Israeli Finance Minister Bezalel Smotrich threatened last May to cut off a vital banking channel between Israel and the West Bank in response to three European countries’ recognition of the State of Palestine.
Smotrich informed Prime Minister Benjamin Netanyahu that he “does not intend to extend” the guarantees granted to Israeli banks dealing with Palestinian banks to give them immunity from any lawsuits they may face on charges of “financing terrorism,” according to him.
This annual protection granted by the Israeli government, which expires on June 30, is necessary to allow the Israeli banks Hapoalim and Discount Bank to continue playing the role of correspondent between Palestinian banks and their counterparts in Israel and other countries.
Smotrich also decided to deduct about $35 million from the tax revenues collected for the Palestinian Authority and transfer it to the families of “victims of terrorism,” accusing the Palestinian Authority of “encouraging terrorism,” according to him, by paying money to the families of martyrs and prisoners, including those released.
Humanitarian crisis
The Israeli minister’s threats raised major concerns in Washington, as US Treasury Secretary Janet Yellen believed that “cutting off Palestinian banks from the Israeli banks that deal with them will create a humanitarian crisis.”
She stressed that “these banking channels are essential for making transfers that allow about $8 billion in imports coming from Israel, including electricity, water, fuel, and foodstuffs, and facilitate about $2 billion in exports per year, on which the Palestinians depend to secure their livelihood.”
For his part, the Governor of the Palestinian Monetary Authority, Firas Melhem, explained that cutting off banking channels “will have a major impact on us because our economy depends on the Israeli economy and because Israel controls the borders.”
The Palestinians were harmed by preventing workers from entering Israel to work, and by a sharp decline in tourism activity in the West Bank.
On the security level, the West Bank has witnessed an escalation in violence for more than a year, which worsened in particular with the Israeli aggression on the Gaza Strip, which led to the martyrdom of more than 546 Palestinians at the hands of Israeli forces or settlers, according to Palestinian officials.
Western countries fear that Israel’s economic policy will spark chaos in the West Bank.
A European diplomatic source in Jerusalem, requesting anonymity, warned that “the banking system may collapse… The Palestinian Authority is in a financial crisis and may collapse before next August.”
Musa Shamiya, who owns a company that manufactures clothing, believed that Israeli policy aims to push the Palestinians to leave the West Bank.
He said that the Israelis “want us to leave our land, and they know that it will be difficult for us to stay if we cannot do business.”
Firas Melhem recommended that “we must work on an alternative plan regarding trade relations.”
