Israel and the Palestinian Authority (PA) reached an agreement Aug. 22 for the transfer of 2 billion Israeli shekels ($566 million) to the latter’s empty treasury. The agreement offers the PA an exemption from taxes for the gas it buys from Israel (applied retroactively to the past seven months), thus throwing an economic lifeline to the PA and its employees. It might even prevent a continued escalation in the West Bank.
The crisis began in February when Israel started to implement the Deduction Law, authorized by the Knesset in July 2018, by which it deducts about 45 million shekels ($12.7 million) a month from the taxes and customs it collects on behalf of the PA. In response, Palestinian President Mahmoud Abbas refused to receive the rest of the money collected on behalf of the PA — about a half billion shekels ($141 million) a month, which constitutes more than half of the PA’s monthly budget. All this led the PA to a grave economic crisis and a significant cut in salaries for its employees, including for security personnel. Even promised aid from Arab countries did not cover the enormous deficit.
The continued crisis led Palestinian Prime Minister Mohammad Shtayyeh to warn June 5 that without money security personnel would be fired and security cooperation and the joint fight with Israel against terror would then practically end. Following warnings from the Israeli security establishment regarding the collapse of the PA, Prime Minister Benjamin Netanyahu instructed Finance Minister Moshe Kahlon, the only minister in direct contact with the Palestinians, to find a solution for the crisis — which was ultimately reached last week. The solution at this stage is partial. The Palestinians still refuse to receive the money that Israel collected for them since the start of the year. It seems that the remainder of the solution will be worked out after the Israeli election on Sept. 17.
Security cooperation is important to the PA, since Hamas is trying to undercut its control of the West Bank. According to past reports, Israel prevented a Hamas coup attempt in the West Bank in 2014. But security cooperation is no less important to Israel.
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