835 Million Dollars Without Balance: Returned Checks Reveal Liquidity Crisis in Palestine

Author: د.سعيد صبري

The issue of returned checks is one of the most critical crises facing the Palestinian economy today, as it not only reflects a liquidity squeeze but also reveals a vicious cycle of lost trust between citizens and banks, and between merchants and their customers. What complicates the crisis further is its direct link to the excess of shekels in local banks and the inability of the banking system to deposit them in Israeli banks.

Terrifying Numbers and an Escalating Crisis
"A 65% increase within seven months puts small traders and employees at the eye of the storm"
Data from the Palestinian Monetary Authority reveals that the number of returned checks since the beginning of 2025 until the end of July has exceeded 387,000 checks valued at nearly 835 million dollars, meaning that approximately one in six checks is returned without payment.

The more alarming fact is that the numbers are increasing: from 46,000 checks in January to over 76,000 in July, an increase close to 65% within seven months. This rapid leap confirms that the phenomenon is no longer individual cases but a structural crisis. Worse still, most of these checks are related to transactions of small and medium enterprises, which are the backbone of the Palestinian economy.

Every returned check means a deal stalled, delayed wages, or a small enterprise that has lost the trust of its customers.

Small and Medium Enterprises... The Biggest Loser

While large companies can absorb some losses, small and medium enterprises, which represent over 90% of the private sector, are the most affected: the small trader is deprived of renewing their goods due to unpaid dues.

Emerging businesses are choking and closing their doors or laying off employees.

Trust among traders collapses as the rejection of checks increases or cash guarantees are requested in advance.

From Checks to the Shekel Crisis
Behind the crisis lies the dilemma of shekel surplus. Over 22 billion shekels have accumulated in Palestinian banks, unable to be deposited in Israeli banks due to restrictions, while the market suffers from a shortage of dollars and dinars.

This contradiction has led the banking system to face a suffocating duality: a shekel surplus that cannot be exchanged, and a deficit in hard currencies that cannot be compensated. Thus, the shekel check has lost its value as a payment tool, and traders fear accepting it because it may not convert into actual liquidity or into the currency needed for foreign trade. 

The Government Employee: From Victim to Accused

Ironically, the government employee, who was considered a reliable customer, has become a part of the crisis. With salaries disbursed in partial percentages (sometimes 80% and sometimes less than 50%), many employees have resorted to issuing post-dated checks to cover their obligations: school fees, medical treatment, utility bills for electricity and water, telecommunications, and even the price of food supplies.

But when the salary is delayed or reduced, these checks are returned for insufficient funds, leaving suppliers and service providers facing direct losses. Thus, the employee transitions from being a victim of the salary crisis to being accused of issuing bounced checks, deepening the loss of trust and crippling commercial movement, threatening to halt essential services for entire families.

Multiplying Effects on Trust and Stability

The crisis of returned checks does not only disrupt financial flows between individuals and companies, but it also leads to erosion of trust in the market and a decline in commercial transactions, while constraining growth opportunities for small and medium enterprises due to the loss of financing and liquidity, ultimately turning into a wide social crisis that drives thousands of families to face living pressures and accumulated legal issues, threatening both economic and social stability.

What is Required?
The problem is not technical but structural. What is needed:
Practical solutions for the shekel surplus through international agreements or local instruments.
Funding lines to support liquidity for small and medium enterprises.
Developing electronic payment methods to reduce reliance on checks.
Deterring legislation to protect victims of bounced checks.

Conclusion
Returned checks are no longer just worthless papers; they have become a mirror reflecting the depth of the monetary crisis and the loss of trust in the market. They are a continuous bleeding that strikes small traders, undermines the stability of thousands of families, and threatens to disrupt essential services, such as water, electricity, and telecommunications, for a broad segment of society.

Instead of the check being a symbol of commitment and trust, it has turned into a deferral paper with an unknown deadline, transferring the crisis from one trader to another, and from one family to another, with no clear prospect for a solution.