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Teetering West Bank economy fuels instability, fear of PA security collapse

An economic downturn in the West Bank as a result of increased security measures and Israel withholding funds to the Palestinian Authority is fueling instability.
TOPSHOT - A young young boy raises a Palestinian flag as he stands with another amid the debris of a house damaged in an Israeli raid followed by clashes with Palestinians, in the occupied West Bank Jenin refugee camp on November 10, 2023. Israeli forces on November 9 killed 18 Palestinians across the occupied West Bank, the territory's health ministry said, most of them shot dead during an army raid on Jenin. (Photo by Aris MESSINIS / AFP) (Photo by ARIS MESSINIS/AFP via Getty Images)

As US Secretary of State Antony Blinken prepares for yet another visit to Israel and the West Bank this week, the economic situation in the occupied West Bank is fast deteriorating. 

At the time of this writing, Palestinian public servant salaries have not been paid for two months. In an attempt to limit the crisis, the Palestinian Ministry of Education decided to close public schools in favor of virtual learning as some teachers have said they do not have the small amount of money needed to commute to work. 

To address the problem, the Palestinian government has struck a deal with local banks to offer public servants a cash advance of up to 1800 shekels ($480) in the form of a loan guaranteed by the Palestinian Monetary Authority at 3% interest. It is not clear whether the interest will be paid by the public servants or the government.

Spillover effects of war 

The economic downturn since Oct. 7 is partly a result of Israel stepping up security measures in the West Bank and limiting freedom of movement for those who work in Israel. The total value of lost revenue, however, remains unclear. 

The economic situation in the West Bank is also being hamstrung by Israel withholding funds earmarked for the Palestinian Authority. For decades, Israel has collected tax and customs duties on behalf of the Palestinian Authority before transferring the monies to the Ramallah-based government. But, in light of its war with Hamas, Israel's government pledged this month to deduct the funds the PA uses to fund public services in Gaza, withholding roughly $100 million, according to Israeli media. The Times of Israel reports that the monthly deposits to the Palestinian Authority make up 65% of the government's annual budget. 

Blinken’s arrival this week comes amid US criticism of Israeli policies in the West Bank that Washington has said are inflaming tensions in the Palestinian territory concurrent with the war in Gaza. 

What's more, economists are saying that the war atmosphere has meant that people are hoarding any extra funds in fear of what's to come. A recent trip to Ramallah showed that restaurants and businesses are seeing a major drop in customers. 

Another major source of lost income has been tourism, for which October and November are usually the high seasons for Western tourists. Since Oct. 7, many scheduled tour groups have cancelled their trips, while major carriers have also canceled flights to Israel and Palestine.

Few are stepping up to help

International and Arab donors have not filled the financial need of the Palestinian government, partly due to political pressure on Palestinian President Mahmoud Abbas, who has been criticized for not condemning Hamas' Oct. 7 attack. It is no secret that powerful states like the United Arab Emirates back Abbas opponents like Mohammed Dahlan to take over the PA leadership, while other US allies may be looking for a clear signal from Washington before they offer to bail out the PA. 

It is also unclear if any of the promises made to the Palestinian leadership during the recent Arab summit will be fulfilled, as most donors are now focused on addressing the urgent humanitarian needs of the 2.2 million Palestinians in Gaza.

While President Abbas has dispatched his minister of health to Rafah, Egypt, to help fulfill the needs of Palestinian hospitals in the enclave, the reality is that Gaza is a financial black hole and all resources of Arab states are now focused on alleviating the humanitarian situation there, not in the West Bank. 

Still, if this economic situation is not resolved, we might see a total failure of public services in the West Bank. If security personnel continue to go unpaid it could lead to a security nightmare both internally and externally. 

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