Who Rules the Palestinian Economy? The Citizen or the Donor?

The most critical question in the Palestinian economy is not how many resources we possess, nor how we reconstruct, but a deeper question: Who governs the economic decision? Is the Palestinian citizen the reference point, or are the policies ultimately shaped according to the logic of the funder, donor, and external entities?

In any normal economy, governance is assumed as a mechanism that links public decision-making with the public interest. This means that economic policies are built based on the needs of society and are held accountable through its representative institutions. However, in the Palestinian case, governance lives in a structural paradox: there are existing institutions, written laws, and established oversight bodies, yet the final reference for decision-making is often not entirely internal but distributed between external political considerations, funding conditions, and known sovereignty constraints.

Palestinian economic policies are formulated in an extremely complex environment: occupation that restricts movement, political division, prolonged absence of an effective legislative council, and chronic financial dependence on external funding. In this context, the funder becomes — by de facto — an unannounced partner in shaping priorities, not because they explicitly impose their agenda, but because the very structure of funding automatically creates an unequal balance of power between those who fund and those who decide.

This problem becomes evident when examining the structure of funding. Palestine receives annually between 3 to 3.5 billion dollars in external aid on average over the last decade, equivalent to about a third of the gross domestic product, making it one of the most aid-dependent economies in the world. The alarming part is that this reliance is no longer temporary or circumstantial but has turned into a permanent structure that finances the heart of the public system itself.

The salaries of the Palestinian public sector, which approach 2 billion dollars annually and cover about 180,000 civilian and security employees, depend about 40 to 50% on direct or indirect external funding. In this sense, the funder is no longer just a partner in development but has become a partner in the continuity of the state itself. Social stability has become contingent on external flows that do not adhere to national decision-making but to changing political and regional equations.

The question here is not an ethical one, but structural: when an external party funds a large part of the public budget, it is natural for them to have an influence on spending direction, project types, and evaluation frameworks. The problem is not the existence of funding but the absence of a clear national framework that transforms this funding from a reference point of decision to a support tool and from a directing element to an empowering one.

In Gaza, this crisis manifests itself in its clearest forms. Reconstruction is discussed in terms of money, not governance. Who will fund? How much will be paid? When will implementation start? But the absent question is: who will decide the form of reconstruction? According to what priorities? And with what community accountability? Without a national governance framework, aid turns into managing long-term devastation, not into sustainable economic recovery.

The banking sector is a clear example of this complex problem. Palestinian banks are technically strong, regulated, and linked to the international financial system, but they operate within a political-economic environment that limits their developmental role. There is no national framework linking banking liquidity with clear economic priorities: employment, production, geographic justice, or protecting vulnerable groups.

Despite this, the Palestinian banking sector holds deposits of nearly 21 billion dollars in various currencies, which is a huge number relative to the size of the economy. But the paradox is that less than 15% of these deposits go to actual productive investments, while the majority accumulates in consumer channels, real estate, or in financing government debt. The money exists, but its decision is distributed among market logic, funding conditions, and political constraints, not according to a comprehensive national developmental vision.

At this point, the governance crisis shows its true essence: the absence of popular reference in economic decision-making. True governance does not merely mean the presence of institutions, but that these institutions are accountable to society and that economic policies are measured by their impact on people's lives: job opportunities, cost of living, justice in resource distribution, and resilience capacity.

The absence of accountability is the central knot. When there are no effective representation mechanisms, insufficient transparency in data, and no community participation in setting priorities, economic policies become top-down decisions, even if made with good intentions. The citizen becomes a receiver rather than a partner, a beneficiary not an actor, an object of policy rather than its maker.

Here the question becomes: is it possible to restore the popular reference for economic decision-making in this reality?
The realistic answer is not in rejecting external funding, nor in demonizing it, but in rearranging the relationship with it. The solution does not start by cutting aid, but by building a clear national framework that defines priorities before the money arrives and links funding to operational and developmental goals that are accountable.

Restoring economic decision-making requires a new financial governance based on three fundamental principles:
First, financial data transparency, so that budgets, programs, and the impacts of public spending become available for public discussion, not monopolized by elites and institutions.
Second, genuine community participation in determining economic priorities by revitalizing representative institutions, national dialogues, and linking policies to the needs of people, not just financial stability indicators.
Third, connecting banking liquidity to the real economy, not to consumption and debt, through financing tools directed towards productive projects, local value chains, and sectors capable of creating real job opportunities.

In this sense, external funding becomes a support tool rather than a decision reference, and banks transform from mere deposit holders to partners in development, and economic policy regains its meaning as an expression of societal will, not merely a technical response to external conditions.

In the end, it is impossible to build a sustainable Palestinian economy if the reference for decision-making remains outside the community. Funding is necessary, banks are important, and international institutions are a partner that cannot be neglected, but the ultimate reference must be Palestinian: Palestinian priorities, Palestinian accountability, and an economic vision that stems from within, not from external conditions.

The real question is not who funds the Palestinian economy, but who owns it politically. Unless governance is rebuilt on the basis that the people are the reference, the Palestinian economy will remain stuck between managing a permanent crisis and sovereignty deferred to an unknown future.