History, Reality, and Treatment of the Financial Crisis of the Palestinian National Authority

Author: د. ماهر تيسير الطباع

The history of the financial crisis of the Palestinian National Authority dates back to 2008 when the global financial crisis began, where it was significantly affected by this crisis due to a decrease in external support from donor countries. The financial crisis intensified in September 2011 after the Palestinian Authority announced its intention to approach the United Nations for the recognition of Palestine's membership. Israel hastened to withhold the monthly tax revenues it collects on behalf of the Authority, which were estimated to exceed 100 million dollars at that time. According to data from 2024, the monthly clearance rate was between 700 and 800 million shekels (approximately 180–210 million dollars) in gross revenues before deductibles. Additionally, the United States halted its financial aid to the Authority, leading to a severe financial crisis that affected all aspects of economic life and created significant confusion in the payment of salaries for Authority employees in the West Bank and Gaza Strip.

Today, fourteen years after the onset of the financial crisis, it is worsening again in 2025 as Israel has completely stopped transferring the clearance payments, which Israel often uses for its own interests and political agendas. Sometimes it hastens to seize funds, and sometimes it quickly transfers money. The Authority is expected to face a severe financial crisis in the coming months, which will in turn affect all aspects of economic and social life.

The choking financial crisis faced by the Palestinian National Authority is the result of years of accumulated neglect in planning and establishing suitable strategies and policies for the Authority as an emerging body that must focus on building institutions, developing and growing the local economy through sustainable projects, supporting productive industrial and agricultural sectors, improving the investment environment, supporting small projects, opening Arab markets to Palestinian products, and opening Arab labor markets to Palestinian workers, qualifying them for the transition to an independent state that can rely on itself. Since its inception, the Palestinian National Authority has depended on international and Arab external aid to cover its operational expenses and fill the deficit in the general budget. The external support needed is estimated to exceed 1.5 billion dollars annually, and the decline in foreign support and the failure of many donor countries to fulfill their financial commitments, along with Israel's manipulation of the clearance payments, has led to a massive financial crisis that has resulted in accruing debts on the National Authority. According to the latest report from the World Bank, which sounds the alarm, the ratio of Palestinian public debt reached 86.3% of GDP by the end of 2024, with expectations that the public debt ratio will reach 94.6% in 2025, then 96.1% in 2026.

Unpaid debts represent 55% of total public debt, equivalent to 6.4 billion dollars, including:

3 billion dollars owed to the Civil Retirement Fund, accumulated due to the Ministry of Finance's cessation of monthly contributions, despite continuing to pay pensions.

1.5 billion dollars in arrears to the private sector, including dues to pharmaceutical companies, hospitals, and contractors, threatening the stability of the sector and crippling its growth capacity.

1.47 billion dollars in salary arrears for public employees, while the Authority continues to pay 50–70% of salaries since October 2023.

The financial crisis affecting the Palestinian National Authority negatively impacted the economic situation and led to a decline in growth rates across various productive sectors due to the Authority's failure to meet its obligations to employees and suppliers. It also negatively affected all developmental projects implemented by the Authority, contributing to rising unemployment and poverty rates.

Finally, when calculating profit and loss, we find that the Palestinian National Authority has been incurring losses since its establishment in 1994, leading to the public debt reaching 6.4 billion dollars. How long will this loss continue? Hasn’t the time come to develop plans, strategies, policies, and studies to find suitable alternatives for self-reliance and to eliminate politically conditioned grants and aid?

I believe it is high time to take effective measures to rationalize the current operating expenses of the Palestinian National Authority, particularly in the salary and wages sector. Therefore, the Palestinian government, in light of the severe financial crisis, should undertake bold austerity measures, primarily by merging ministries and abolishing others and numerous bodies that are countless, starting immediately with merging the following ministries and abolishing some to save operational expenses and salaries:

Merge the Ministry of National Economy with the Ministry of Industry as it was before.

Merge the Ministry of Education with the Ministry of Higher Education.

Merge the Ministry of Social Development with the Ministry of Relief.

Merge the Ministry of Planning with the Ministry of Finance.

In addition to abolishing many bodies affiliated with the Palestinian National Authority that have no significant impact on the Palestinian economy and society other than increasing expenditures.