The International Emergency Support for the Public Treasury is Good, But!

The public finance in Palestine is undergoing a financial crisis that is the deepest since the establishment of the Palestinian National Authority, as Israel has worked to "zero out" all revenues from the clearance mechanism, which constitutes the main component of Palestinian public revenues, accounting for (68%) of total revenues. This procedure was preceded by a persistent piracy of clearance revenues, which began in February 2019 and escalated in October 2023, reaching its peak in May 2025, when clearance revenues were completely withheld. This has sharply affected the government's ability to implement the general budget for the year 2025 and meet its commitments to employees, suppliers, and other parties. It has also negatively impacted the overall economy, as the financial crisis intersected with several other factors, such as the dismissal of most workers inside the Green Line, a decline in business activity, the blockade and checkpoints in the West Bank, genocidal aggression in the Gaza Strip, rising unemployment, declining purchasing power, and emerging crises like the currency surplus, which have affected the Palestinian economy as a whole, resulting in a 29% decrease in GDP.

In practice, what remains of resources for the public finance after withholding clearance revenues is local revenues, which have decreased from around (400) million shekels monthly to about (250) million shekels monthly due to the contraction of the economic cycle, in addition to limited external support, particularly from the European Union and the World Bank. Therefore, what is practically available monthly does not cover the minimum of the Palestinian government's monthly financial commitments. Hence, the government's call to donors for urgent support to the general budget amounting to (200) million dollars monthly for a duration of (6) months. At a donors' meeting held in New York at the end of last month, the announcement was made to launch an international emergency coalition to financially support the Palestinian Authority. A group of countries led by Saudi Arabia and (5) European countries, namely: Spain, Germany, Norway, Denmark, and Slovenia, announced financial support, amounting to approximately (198) million dollars. Other countries have also expressed interest in funding the emergency fund, but their contributions have not yet been specified. Even now, the donor countries that have specified the value of their contributions have not precisely defined whether this support is periodic or a one-time payment, nor when or how it will reach the authority.

This support is good and will provide liquidity to the public treasury, but it will not, in any way, solve the financial crisis faced by the Palestinian National Authority or create a real breakthrough in the salary crisis; rather, it will mitigate its depth. In numerical terms, the Ministry of Finance needs 400 million dollars at a minimum monthly to cover "a percentage" of the salaries and the minimum of essential operational expenditures, and to service public debt, which has increased due to successive governments' tendency to borrow from banks, including the consolidated loan at the end of 2023, in addition to fuel support. Thus, the emergency support, upon its arrival, and subject to its regular monthly provision, will only cover 50% of the basic monthly needs, at a minimum, and a portion of the salary.

Therefore, there will not be a tangible breakthrough in the public financial crisis. Local revenues barely suffice to cover essential operational expenditures, including limited payments to medicine suppliers, the clearance revenues have been zeroed out, and the international emergency support at its best, and if provided regularly monthly "which is not guaranteed", will not be enough to fill the existing financial gap. Without clearance revenues, there will be no financial breakthrough, or at least a semi-breakthrough, since the financial crisis has been ongoing for several years, even before Israel partially or completely withheld clearance revenues. It is worth noting that the average clearance revenues, even amid aggression, and before Israeli deductions, reach 250-300 million dollars monthly, meaning that external emergency support under the best circumstances will not suffice to cover or fill the gap in clearance revenues or the basic monthly needs, thus keeping the crisis ongoing. Rather it will provide limited financial flexibility for the Palestinian government to deal with the crisis and prevent a collapse in services. Without a solution to the clearance revenues issue, there will be no financial breakthrough, stable financial inflows, or even stable expectations.

Therefore, there is no escape from international, diplomatic, and legal pressure to release the withheld clearance revenues, which have reached (12) billion shekels, as they are the governing element in public revenues. Additionally, there is a need to build the 2026 general budget as a realistic emergency budget based on the available cash flows, allocating its expenditures within national priorities that enhance the resilience of citizens and provide essential services to them, particularly (education/health/social protection), while rationalizing other expenditures and working towards regularizing a portion of salaries for public sector employees to ensure fairness in distribution. Furthermore, there is a need to launch a private sector social responsibility fund to contribute to sharing burdens among all components of the Palestinian spectrum and continue efforts to mobilize external support for the general budget.