One Economy on Paper… Two Economies on the Ground

The question today is no longer whether the Palestinian economy is in crisis, but which Palestinian economy are we referring to? The economy of the West Bank, which is still operating at its minimum capacity, or the economy of Gaza, which has turned, due to war and destruction, into a dysfunctional economy outside of the normal financial time. Between these two paths lies one of the most serious structural issues: a supposed economic unity on paper, but effectively divided at the level of money, liquidity, and the banking system.

Theoretically, the West Bank and Gaza Strip fall under the same economic framework, with the absence of monetary sovereignty, reliance on the shekel, the dominance of the clearing system, and Israeli restrictions on the movement of money. However, reality shows that the impact of these restrictions is not equal. While the West Bank still possesses a minimum operational financial capacity, Gaza today is experiencing a near-total collapse in its organized cash cycle, making the talk of a "unified Palestinian economy" closer to an administrative description than a tangible economic reality.

This collapse in Gaza is not only due to the enormous material destruction but also to the disruption of the financial infrastructure itself. With the destruction of bank branches, power outages, and communication breakdowns, and the inability to access bank accounts, the financial system has been removed from the equation, replaced by a forced cash economy, based on limited, dilapidated, and unregulated cash. In this context, cash has ceased to be a normal means of exchange and has turned into a tool of economic suffocation.

Here, the liquidity crisis emerges as a symptom of a deeper problem. The cash shortage is not just a matter of financial instruments, but a direct result of the absence of pumping channels, the cessation of banks from performing their natural role, and the impossibility of introducing sufficient amounts of currency. Over time, transactions have stalled, the cost of buying and selling has risen, the informal economy has expanded, while prices have lost any logical reference to people's payment capacity.

In contrast, despite all the political and economic challenges, the West Bank still benefits relatively from having a functioning banking system and a wider spread of electronic payment tools and bank transfers, allowing economic activity to continue within manageable and controllable limits. This monetary and financial gap between the two regions does not reflect a difference in economic culture or financial behavior, but a forced disparity in the ability to access the financial system itself.

This gap becomes starkly evident when looking at the distribution of bank deposits. Banking estimates indicate that the total bank deposits in Palestine are nearing $21 billion, calculated in various currencies, with the vast majority concentrated in the West Bank. In Gaza, despite nominal deposits rising during the war to exceed $4 billion, most of them remain stagnant and trapped deposits, unable to convert into actual liquidity in the market. For comparison, the volume of circulating operational deposits in Gaza before the war was only around $1.5 to $2 billion. This paradox clearly reveals that the problem in Gaza is not the lack of money itself, but the absence of the ability to use it economically.

The situation becomes even more complicated when looking at the issue of bank accounts and financial inclusion. While the percentage of bank account ownership and their actual use is rising in the West Bank, thousands of accounts in Gaza have become forcibly inoperative. Not due to a lack of financial awareness but as a result of the collapse of the banking operational environment itself, turning the bank account from an economic empowerment tool into a static number devoid of function.

Despite the bleak scenario, this gap carries an opportunity within it. The existence of a base of existing bank accounts, even if inoperative, could serve as an entry point for rebuilding the financial cycle if the banking system is reactivated under an exceptional approach that fits the post-destruction reality, treating Gaza as an economy in a state of emergency, not a traditional market.

Thus, the role of banks in Gaza becomes crucial, not only as a financial intermediary but as a tool for economic recovery. Reconstruction cannot begin in an economy that operates solely on cash, and aid cannot continue to flow outside organized channels without turning into an additional burden. What is required is a different banking role, more flexible, focused on reactivating accounts, linking them to simplified digital payment tools capable of working in low-connectivity environments, while managing aid and transfers within a banking framework that ensures transparency and limits cash chaos.

Palestinian banks possess the technical expertise and institutional accumulation that qualify them to undertake this role, but they need clear regulatory coverage and international partnerships that reduce risks and allow them to operate outside the traditional credit-based model. Recovery in Gaza will not start from large loans, but from small, phased financing targeting food security chains, basic services, and micro-projects that reinvigorate the economic wheel from the ground up.

However, any real recovery will remain incomplete if the financial separation between Gaza and the West Bank persists. What is needed is not only the reconstruction of Gaza but its financial reintegration into the Palestinian economy as a whole through unified operational policies, shared payment platforms, and organized liquidity flows. Continued separation will turn Gaza into a permanent relief economy and will increase the pressure on the West Bank, which will find itself forced to absorb imbalances that it cannot bear.

In conclusion, the Gaza economy crisis is not just a crisis of destruction, but a crisis of absent financial integration. The cash crisis is not a fate, but a result of the absence of an emergency and comprehensive financial vision. Empowering banks, developing alternative payment tools, and connecting Gaza with the West Bank through a unified financial path is not a technical choice, but a prerequisite for any real and sustainable economic recovery.