10 Billion Held and an Economy Choking: Has the Collapse Approached?

The Palestinian economy is facing an unprecedented crisis, intertwining financial and political issues in a scene that threatens total collapse. Amid held clearance funds, a sharp decline in international aid, and accumulated debts, the Palestinian Authority finds itself directly facing a growing financial deficit, raising fundamental questions about the future of the national economy.

For a long time, clearance funds – the taxes collected by Israel on behalf of the Authority – have been the main source for financing current expenditures, covering about 70% of public revenues. However, these vital funds have become a tool of pressure wielded by the occupation, withheld or significantly deducted unilaterally for political reasons. According to the Ministry of Finance's data, the total deducted since 2012 until early 2025 is about 20.6 billion shekels, equivalent to approximately 5.6 billion dollars, while estimates indicate that the amounts currently withheld by Israel amount to about 10 billion shekels, a staggering figure that exceeds more than three times the Authority's monthly local revenues. This reality places the Authority in a state of continuous financial choking, confirming that the clearance funds are no longer a stable resource, but rather a political weapon used to financially extort Palestinians.

In parallel, international aid has witnessed a sharp decline. While it peaked in 2008 at over 1.3 billion dollars, it has recently decreased to less than 500 million dollars, and in some years, it dropped below 300 million. Importantly, the pattern of support has changed as well, shifting from direct budget transfers to funding scattered projects through international institutions, depriving the government of the financial maneuverability it needed to face crises.

In light of this contraction in resources, the salary bill has emerged as the largest internal burden. The cost of salaries for employees, retirees, and allowances for prisoners and martyrs' families amounts to about 1.05 to 1.1 billion shekels monthly, equivalent to 272 to 300 million dollars. This figure absorbs over half of the current expenditures, rendering the Authority unable to fully cover it, leading to a policy of partial salary payments, which has negatively affected the lives of hundreds of thousands of Palestinian families.

The equation becomes increasingly difficult when we realize that local tax revenues do not exceed 450 million shekels monthly, which is less than 40% of the salary bill alone. This gap reveals a structural defect in the financial system, indicating that the Palestinian economy lacks sufficient self-financing tools to cover even basic expenses.

However, the crisis does not stop there. The public debt – both domestic and external – has surpassed 10 billion dollars, a figure that is nearly equivalent to the total annual salaries. As the deficit widened, the Authority turned to borrowing from local banks to cover expenses, weakening liquidity in the market and negatively impacting the private sector, exacerbating the slowdown in economic growth.

The results have been evident in the markets: commercial stagnation, a sharp decline in purchasing power, and a significant reduction in local and foreign investments due to eroded confidence in financial stability. The citizen bears the brunt, facing incomplete salaries, high living costs, and a bleak future. With the start of the school year, an employee finds himself unable to pay for his children’s school or university fees, while his deducted and delayed salary is insufficient to cover the essentials.

It is unrealistic to believe that international support can compensate for clearance funds, or that clearance funds are sufficient to revitalize the economy. Aid continues to decline, and donors are no longer willing to finance a budget burdened with salaries and debts. As for clearance funds, they barely cover operational expenses and leave no room for investment or building a sustainable economy.

Despite this reality, the government has not announced any genuine emergency plan that matches the depth of the crisis. Relying on patchwork solutions, such as partial salary disbursements or repeated borrowing, simply means prolonging the crisis rather than solving it. There is an urgent need for bold decisions that include restructuring public spending, rationalizing salaries, and expanding the tax base by integrating the informal economy and combating tax evasion, while ensuring greater tax fairness.

Resources must also be directed towards building a real productive economy, relying on sectors such as industry, agriculture, and technology, instead of continuing a model based on consumption and dependency on the outside.
In short, the crisis is no longer merely financial, but existential. Escaping it requires real political will and courage in confronting painful realities. Either we begin serious reform now, or we continue on the path toward a collapse that could become a reality at any moment.