The economy of the Israeli-occupied West Bank is facing severe strain due to a combination of Israeli financial policies, including the withholding of tax revenues and restrictions on currency circulation, pushing the region towards a potential collapse. These measures have significantly impacted the Palestinian Authority’s (PA) ability to function and have led to widespread economic hardship among the Palestinian population.
According to details received by The Chenab Times, Israel has withheld substantial amounts of tax and customs revenues collected on behalf of the PA. These revenues constitute a significant portion of the PA’s budget, with some reports indicating that Israel has withheld approximately $4.4 billion in Palestinian tax revenues over a period of nearly a year. This has led to a severe budget shortfall, preventing the PA from paying civil servants, including teachers and hospital staff, their full salaries for over a year and disrupting essential public services.
Furthermore, Israel revoked most work permits for Palestinians who previously worked in Israel, cutting off a major source of income for many households in the occupied territory. This exacerbates the economic downturn, contributing to rising unemployment rates in the West Bank, with some reports suggesting unemployment has reached as high as 25% and poverty affecting over 30% of households.
Adding to the economic distress is an unusual situation involving excess Israeli shekels within the Palestinian banking system. While Gaza faces cash shortages due to a blockade, banks in the West Bank are reportedly accumulating large amounts of Israeli currency that they cannot easily deposit or convert due to limits imposed by the Bank of Israel on currency repatriation. Palestinian officials describe these limitations as a mechanism to maintain economic crisis in the territory, with the Palestinian Monetary Authority stating that the situation has left banks “shackled” and engaged in “economic warfare.” The annual limit for physical currency Israel takes back from the West Bank’s banking system is reportedly around 18 billion shekels, while banks are accumulating an estimated 30 billion shekels annually.
The situation has drawn criticism from international bodies and experts. UN experts have stated that Israel’s financial stranglehold on the occupied Palestinian territory must end, citing violations of the Oslo Accords and the rights of the Palestinian people. They point to the arbitrary diversion and withholding of tax revenues, the undermining of liquidity, and restrictions on economic activity as measures that violate Israel’s obligations as an occupying power and impede the Palestinian people’s right to economic self-determination.
The economic erosion has had a tangible impact on daily life, leading to a slowdown in trade, investment, and overall economic activity. Palestinian financial institutions are reportedly close to insolvency, and debt loads have skyrocketed for both consumers and the PA itself. The cumulative effect of these policies risks further instability and greater violence, as Palestinian society faces grinding immiseration without prospects for economic and political independence.
The International Crisis Group has urged for international pressure on Israel to take steps to allow cash to flow into Palestinian households and businesses by lifting excessive movement restrictions and punitive financial measures. They emphasize the need for remedies to prevent a loss of hope and mitigate the growing risk of instability.
The economic crisis in the West Bank is characterized by a sharp contraction of the economy, making it unable to support basic public services. This situation, sustained over time, has fostered increasing dependence on the Israeli economy, with the PA having no monetary policy influence over the Israeli shekel, whose value is dictated by Israeli economic conditions rather than Palestinian ones. Trade is heavily reliant on Israeli-controlled ports, and movement restrictions have fragmented the West Bank into micro-economies that struggle to conduct business with each other.
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