With the launch of the Zionist aggression on the Gaza Strip after the October 7 attack, and in parallel with the military war it waged, the occupation took economic and field measures in the form of sanctions and restrictions that exacerbated the difficult living conditions experienced by the Palestinians.
Examples of this include: laying off West Bank workers, preventing their entry into the 1948 lands or West Bank settlements, deductions from the Palestinian Authority’s clearance funds, and imposing restrictions on movement between the West Bank governorates. Which led to immediate and direct results on the “economy” of the Palestinians and their living conditions.
This article examines how the Palestinian Authority, represented by the Ministry of Finance and the Monetary Authority, dealt with helping the population and alleviating the financial burdens that the war left on them.
The fragile nature of the Palestinian economy
Primarily due to political considerations related to the occupation, the “Palestinian economy” and its banking system suffer from structural problems, which make it more vulnerable to the tremors and shocks resulting from any political, economic, or health changes and crises, in addition to the military.
The fact that the Palestinian economic and banking system is a system with incomplete sovereignty, powers, and institutions makes the discussion of its policies, procedures, and the limits of its capabilities governed by these limitations.
This includes the absence of a national currency and the ability to independently approve interest rates, the absence of control over natural resources and borders, as well as an important part of financial collection resources (clearance funds collected by the occupation), and other determinants that make the plans of the decision-maker in the Palestinian economy restricted and governed. With data that limit his ability to formulate and implement independent plans and policies.
However, despite these structural problems and limitations, a small margin remains available to take measures and policies that contribute to developing and improving the structure of the “Palestinian economy” and mitigating the impact of various crises through advance preparation for them, prior focus on productive sectors, supporting them, and enhancing their share in the economy, as well as through Establishing pre-settled support and hedging funds.
Bounced checks crisis
Immediately after the outbreak of Operation Al-Aqsa Flood, the direct effects of the aggression began to appear on the Palestinian economy and their financial transactions. One of the manifestations of this was: Nearly 200,000 workers became unemployed, even temporarily, after the occupation prevented them from entering their jobs inside the occupied territories, thus cutting off their only source of income from them and their families.
As a result of the financial situation of West Bank residents being affected, the number of returned checks began to rise over time. The value of returned checks increased by 49% in the first month of the war, compared to the same month last year. While the percentage of returned checks out of the total number of checks during the first 45 days of the war reached 22%, after it was 9% in the month before the war.
It is important here to know that revealing and returning checks, or stopping payments on loans and obligations and trying to postpone them, is a traditional protectionist behavior that people engage in with any crisis that appears, even before its facts and consequences take shape.
What exacerbated the difficult situation was the occupation’s decision to deduct the Gaza Strip’s share of the Palestinian Authority’s clearance funds, so the latter refused to receive the incomplete amount, which constitutes direct consequences for the Authority’s already limited budget. While public employees used to receive their salaries at a rate ranging between 80%-90%, in the first month of the war they received their salary at a rate of 50%.
Authority actions
In measures similar to its procedures at the time of the Corona pandemic crisis, the Palestinian Authority – through the Ministry of Finance and the Monetary Authority – made arrangements with banks according to which loan payments resulting from the salaries of public employees are postponed or rescheduled, while providing the possibility of obtaining advances or limited financing to cover obligations and payments. Loans.
Naturally, this entails additional benefits for employees, which may cause more economic pressure on them in the medium and long term if the crisis is prolonged.
The Palestine Monetary Authority also announced the establishment of the “Sustainability Plus” Fund with a value of 500 million shekels, as an emergency fund to provide “low-interest” facilities to small and medium enterprises that have suffered and are expected to suffer from the effects of the current crisis and the decline in the economic and financial cycle, so that through the facilities of this fund, they can Covering its emergency liabilities and continuing to operate.
Aside from discussing the adequacy of this fund to assist projects, the most important question is about the effectiveness of the measure, which appears to be merely a palliative, without being part of long-term sustainable planning and procedures that provide support and protection for these projects, which essentially operate in an extremely difficult environment imposed by the occupation with its procedures and restrictions on Movement, export, import, resources, etc., as well as discussing the foundations that created this reality and its complexities related to the establishment of the authority and the nature of the agreements signed between it and the occupation and the extent of their application.
A necessary discussion
In times of crises, there is a tendency towards emergency measures and exceptional steps, especially when it becomes clear that traditional plans and procedures are not as flexible as they should be, and their drafters did not take into consideration in advance their inclusion of mechanisms for dealing with expected crises. In the Palestinian case, the occupation’s escalation of its aggression or war is not unlikely.
This leads us to discuss the measures taken by the Palestinian Authority from a broader point of view, which suggests that these exceptional measures will remain limited to responding to crises, and may even contribute to causing future harm to the groups targeted by them.
For example, the problem of bounced checks recurs with every crisis, without reviewing the legal structure, court procedures and their applications, and the mechanisms used to treat and settle bounced checks, as well as banks’ rules and regulations for issuing checks.
This could contribute to reducing the extent of this problem in a sustainable manner, with the need to note that the current method used in handling returned checks results in large commissions for the benefit of banks and the Monetary Authority, as the value of commissions for processing returned checks, according to the “Al-Iqtisadi” website, amounted to approximately $15 million for 747,000 returned checks during the first ten months of 2023.
The same discussion applies to the idea of an emergency fund that will provide small and medium-sized enterprises with their needs, as the cost of the soft loans provided by the fund will constitute an additional burden on project owners, and may contribute to plunging them further into an ongoing debt trap, with the continuing consequences of the aggression and the effects of the sanctions imposed by the occupation government. On the Palestinians and on the Authority’s funds, economic projects and establishments are not expected to recover in the near term.
The situation is not much different with regard to public employees, who are the largest segment and perhaps the most affected, as they have been receiving underpaid salaries for a long time, and this percentage has increased with the war and the non-transfer of clearing funds by the occupation.
It is true that postponing and rescheduling their loan payments reduces their maturity temporarily, but at the same time it adds interest and additional costs to them, in a situation that banks seem to benefit the most from, as their current cash flows may be affected, but they will guarantee greater profits and returns in the near future. According to the Palestinian Monetary Authority, there is no fear for the banking sector and its stability as the crisis continues.
During the past two decades, many Palestinian economists and researchers discussed the Authority’s financial and economic policies and proposed amendments to them, which dealt with the tax system and its segments, the shares of development sectors and production sectors from the Authority’s budgets and their support, the nature and quantity of support packages provided to it, and other aspects that could create some kind of sustainability. And stability.
These proposals were based on the recognition that the occupation and its reality will continue to constitute a challenge that will lead to a structural imbalance in the “Palestinian economy.” However, of course, policies and procedures can be proposed within this difficult reality that contribute to strengthening the steadfastness of the Palestinians and supporting their financial and economic stability, which is not happening on the ground.
