The World Bank addressed the Palestinian Authority’s (PA) financial situation on Thursday and reported a significant downtrend seen in the last three months, raising concerns of a possible "fiscal collapse."
In its update on the PA’s fiscal situation — related to the state's treasury and revenues — the World Bank pointed to a rapidly growing gap between the amount of revenue and the amount of funds needed to provide essential public expenditures in Palestinian territories. According to World Bank data, as of the end of 2023, this gap reached $682 million, and is expected to double to $1.2 billion in the coming months.
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Palestinian Authority Chairman Mahmoud Abbas, Finance Minister Bezalel Smotrich
(Photo: AP, Alex Kolomoisky)
The World Bank indicated a significant impact on the PA’s revenues due to a drastic decline in its economic activity. Since October 2023 and following the war in Gaza, the Palestinian economy has lost nearly half a million jobs: about 200,000 in the Gaza Strip, 144,000 in the West Bank, and approximately 148,000 jobs in Israel.
The proportion of Palestinians living below the poverty line stood at 32.8% by the middle of 2023, with dramatic disparities between Gaza and the West Bank: in Gaza, the poverty rate was close to 64%, and in the West Bank, it reached 12%.
Finance Minister Bezalel Smotrich called on Prime Minister Benjamin Netanyahu on Wednesday to take steps against the Palestinian Authority (PA) following the unilateral recognition of Palestinian statehood by Norway, Ireland and Spain and the International Criminal Court (ICC)'s decision to pursue arrest warrants against Netanyahu and Defense Minister Yoav Gallant.
In one of these steps, Smotrich announced that he intends to stop transferring tax revenues to the PA — which Israel collects as part of the Paris Protocol signed between the sides in 1994 — and won't extend the indemnity to correspondent banks that transfer funds to banks in the West Bank.
Israel's Security Cabinet approved in January a framework for transferring the Palestinian Authority’s deducted tax revenues to Norway after Smotrich refused to deliver the funds, raising fears of the PA's collapse as a result.
The United States is making efforts to prevent Smotrich's plan from going forward, as the Israeli defense establishment raised concerns about the PA’s potential collapse, which could lead to chaos in the West Bank.
In light of this, Gallant has made several attempts to increase the number of Palestinian workers entering Israel since October 7, arguing this factor helps maintain stability in the West Bank.