Fifty Billion on the Edge of the Abyss

In the world of economics, major crises do not always come from where people expect.

Sometimes they arise from an artery that no one sees, because it functions silently, and everyone has gotten used to blood flowing through it uninterrupted. And when this artery is threatened, no alarms are sounded, no headlines are made, and decision-makers do not convene in emergency rooms. Statements are issued, and difficult questions are postponed to another time.

This is exactly what is happening today with the issue of banking correspondence between Palestinian banks and the Israeli financial system. Fifty billion shekels pass annually through this channel, involving trade, imports, remittances, and daily liquidity. Each time this issue is raised, it is classified as a technical matter concerning bankers. But the truth that cannot be postponed is this: When this channel stops, the banking system does not stop alone— the economy stops.

The question that must be asked today, before it is imposed on us tomorrow, is a single question: Do we have an alternative plan?

Banking correspondence may seem like a technical issue that only concerns bankers and accountants, but the reality tells a different story. This relationship between Palestinian banks and the Israeli financial system is what allows the importer to pay for his goods, the worker to receive his transfer, and the company to manage its daily liquidity. When this channel is disrupted or narrowed, banks do not stop alone; rather, the entire economy slows down.

The numbers reveal the extent of this vulnerability; nearly 53 billion shekels were settled through these channels in just one year, while the assets of the Palestinian banking sector exceed 24 billion dollars, its deposits are around 20 billion, and its credit facilities exceed 11 billion. Above all this, there is a cash surplus in shekels within the banking system that exceeds 16 billion shekels, which cannot find its way to settlement due to the limited available channels. These are not cold technical figures; they represent an economy dependent on a single bridge that supports an entire economy.

More importantly, the interruption or restriction of these channels does not only threaten banking transfers, but also threatens the Palestinian economy's ability to manage foreign trade. Most Palestinian imports come from Israel or pass through it; also, the vast majority of daily commercial transactions are conducted in shekels. Therefore, any disruption in settlement channels does not merely signify delays in transfers, but may indicate rising import costs, additional pressure on prices, and a reduction in companies' ability to plan and invest.

At the level of the citizen, the effects of the crisis may not appear obvious at first; ATMs will continue to function, and accounts will remain open. But the real impact will seep in through another door: rising prices of imported goods, declining available credit, and slow remittances. The private sector knows well what it means for settlement operations to become complicated; higher costs, slower capital cycles, and investment decisions that are postponed or canceled.

It is enough to imagine an importer who needs to pay one million shekels for a shipment of goods. Any delay in the transfer or increase in settlement costs means freezing capital for a longer period, rising financing costs, and possibly delays in the arrival of goods to the markets. In an economy that already suffers from a liquidity shortage, time becomes an additional cost borne by both the trader and the consumer.

However, the crisis at its core is not a crisis of numbers, but rather a crisis of the absence of an answer to a single question: Who is responsible for building the alternative plan?

The Palestinian Monetary Authority is the regulatory body responsible for leading this file, and it must expedite the expansion of its network of correspondent relationships with regional and international banks, and establish an infrastructure for digital payments that reduces reliance on traditional settlement channels. Commercial banks, in turn, are called upon to diversify their financial pathways rather than relying on a single route, even if this entails costs in the short term. As for the government, it is not enough to leave this file beholden to technical negotiations; it must find its way to the priorities of national diplomatic and economic work.

There are viable alternatives to be built, although they require time and will. Expanding relationships with Jordanian and Gulf banks is possible, but it necessitates a stronger international credit record and political guarantees to reassure partners. Enhancing the use of dollars and euros in certain commercial contracts reduces reliance on the shekel as the sole settlement currency. The shift towards digital payments is the most realistic opportunity in the medium term, and Palestine has witnessed significant development in this area, but its application in foreign trade is still less than hoped.

The Palestinian banking sector has proven over the past decades an exceptional ability to withstand political, economic, and security crises. However, what the banking correspondence crisis reveals today goes beyond the boundaries of the banking sector itself; it unveils the extent of the interconnection between financial stability and economic sovereignty, as well as between daily money movement and the economy's ability to sustain itself.

When tens of billions of shekels annually depend on a single settlement channel, the question becomes bigger than mere banking arrangements or temporary extensions of existing agreements. It is a question of the Palestinian economy's ability to manage its strategic risks and build real alternatives for the future.

Therefore, the discussion needed today is not just how to overcome the current crisis, but how to prevent it from turning into a recurring crisis. Nations are not measured only by their ability to manage crises when they occur, but by their ability to prepare for them before they happen.

And the decision by Israel's Discount Bank to terminate correspondent services for five Palestinian banks, along with the repeated threats from the Israeli Ministry of Finance to halt the necessary guarantees to continue these relationships, is nothing but a reminder that the artery is no longer just an economic metaphor, but has become a real battlefield that affects the stability of the entire Palestinian economy.
And before the artery stops.