The Crisis of Clearance from the Treasury to the Family: Living Implications Deepening the Constrained Palestinian Economic Cycle

Author: Dr. Nabil Koukali

 The results of a survey conducted by the Palestinian Center for Policy Research and Survey (PCPO) reveal that the crisis of clearance funds has exceeded the limits of the public treasury and employee salaries, turning into a living and economic crisis that affects the income of families, their purchasing power, debts, and spending patterns, which in turn reflects on markets and job opportunities.

In a development that exacerbates the crisis, the Israeli Knesset's plenum approved, in a preliminary reading, a bill that allows freezing and confiscating additional amounts from clearance funds, equivalent to what the Palestinian Authority had spent on the Gaza Strip over the past year, and using it to compensate Israelis affected by operations launched from the strip. The bill has been referred to the Foreign Affairs and Security Committee to complete the legislative procedures. 

Thus, the repercussions of the crisis begin with the withholding of public revenues, then move to families and the market, and production, before returning to the treasury in the form of declining revenues and widening deficits. With the continued financial chokehold and pressure on public services, the risks of turning this into a prolonged economic and social contraction increase, deepening the constrained Palestinian economic cycle.

Survey Methodology

The Palestinian Center for Policy Research and Survey conducted this survey from June 24 to July 5, 2026, to explore the attitudes of Palestinian citizens and their assessment of the impacts of the clearance funds crisis and salary delays on economic, social, and living conditions. The survey relied on telephone interviews with computer assistance (CATI), using random digit dialing (RDD) technology. The sample included 503 male and female citizens aged 18 years and older in the West Bank, including East Jerusalem, and the Gaza Strip. The sample was geographically distributed, with 67.6% in the West Bank, including East Jerusalem, and 32.4% in the Gaza Strip. The percentage of males was 53.3%, while females accounted for 46.7%. The age groups of 18 to 34 years constituted 49.3% of the sample, while those aged 35 and older made up 50.7%, reflecting a nearly balanced age distribution, with a slight advantage for the older age groups. The response rate in the survey was 65%, while the margin of error was approximately ±4.4% at a confidence level of 95%, providing a suitable basis for understanding general trends among various segments of Palestinian society.

To Understand the Survey Results: The Problem Lies in the Equation, Not in a Single Financial Payment

Before reading the survey results, it is essential to clarify that clearance funds are not an Israeli grant or foreign aid, but rather Palestinian revenues generated from taxes, customs, value-added tax, and fees imposed on goods destined for the Palestinian market.

According to the Paris Economic Protocol of 1994, Israel is responsible for collecting these revenues due to its control over ports, crossings, and external borders, and it is supposed to periodically transfer them to the Palestinian Ministry of Finance after deducting administrative fees of around 3% for collection and transfer.

Typically, clearance revenues range between 700 million and 1 billion shekels monthly, constituting about 60% to 70% of total Palestinian public revenues in most years. Hence, they represent the primary source of funding for employee salaries, education and health services, social protection, operational expenditures, and the dues of companies and suppliers.

Therefore, the withholding, deduction, or delay of clearance funds does not mean disrupting a separate financial payment, but rather interrupting the starting point in the Palestinian financial and economic cycle. The impact begins with the government's ability to pay salaries and dues, then transfers to family incomes and expenditures, private sector sales, banking liquidity, and job opportunities.

The fundamental problem lies in the fact that this vital Palestinian resource is not under complete Palestinian control; it is linked to an Israeli decision regarding turnover, deduction, or freezing. Thus, the crisis is not temporary but reflects a structural malfunction that makes Palestinian financial and economic stability vulnerable to external decisions.

While a limited transfer may relieve pressure for a short time, it does not address the root of the problem as long as transfers are subject to suspension or political use. Families and markets require a full and regular flow of money that rebuilds confidence, reduces debts, and enables citizens and businesses to plan, consume, and invest.

Therefore, what the survey revealed about income decline, debt accumulation, and difficulty covering basic needs does not represent separate effects but a direct result of the disruption of a fundamental Palestinian financial resource and the imbalance in the equation governing its flow.

A Low-Income Community Facing Continuous Financial Shock

The results of the survey indicate that the clearance crisis has affected a community that already suffers from clear economic fragility. About 57.3% of participants reported that their household average monthly income is less than 2,000 shekels, while 27.6% said their income ranges between 2,000 and 3,999 shekels.

Thus, 84.9% of the families included in the survey live on an income of less than 4,000 shekels per month, while the percentage of families earning less than 6,000 shekels rises to 94.4%. In contrast, the percentage of families with incomes of 8,000 shekels or more does not exceed 1.4%.

These figures reveal the limited ability of most families to save or build financial reserves that would allow them to cope with salary delays or reductions for consecutive months. A family that allocates most of its income to food, housing, healthcare, education, and transportation lacks a wide margin to absorb shocks.

When the salary is delayed or partially paid, the family does not merely give up some luxuries; it has to choose between competing basic needs, such as buying food, paying the electricity bill, or covering a bank installment, or education and healthcare expenses.

Thus, the effect of the clearance crisis cannot be separated from low-income levels; the lower the family income, the less able it is to cope with shocks, and any financial delay turns into direct pressure on its living and social stability.

A Financial Crisis Transforms into a Living Crisis

Survey results showed that 51.5% of participants reported that their families' living conditions were greatly affected by the clearance crisis and salary delays, while 18.7% said they were significantly affected.

Thus, the percentage of those who were significantly or greatly affected reached 70.2%. When adding those who said they were moderately affected, the total affected group rises to 84.7%, while those who felt any degree of impact reach 90.7%. In contrast, only 8.7% stated they were not affected.

These results indicate that the crisis has become a widespread living experience, not just a situation affecting public employees alone. Delayed salaries translate into impacts on family members, companies reliant on government contracts, suppliers, traders, and workers in sectors dependent on local spending.

Moreover, the rising percentage of those who described the impact as "very significant" at over half the participants suggests that Palestinian families are not just facing a passing difficulty in managing their expenditures, but rather under pressure affecting their ability to meet basic needs and maintain a minimum level of stability.

From Income Decline to Debt Accumulation

The results reveal that the crisis does not leave a single impact, but rather produces a series of interconnected economic pressures. About 29.8% of participants considered the decline in monthly income as the most apparent effect on their families, while 26.4% pointed to increased debts and financial obligations, and 23.1% reported facing difficulties in covering basic needs.

Thus, 79.3% of participants faced one of three main effects: decreased income, accumulated debts, or inability to provide essential needs.

Income decline appears as the starting point in this chain. When income falls or becomes irregular, families resort to borrowing or postponing obligations, and as the crisis continues, debts transform into a new burden that consumes part of their future income.

This means the harm does not end once a delayed salary is paid; families with accumulated electricity and water bills, or bank installments, or debts with stores and relatives will use a substantial portion of any subsequent income to settle prior obligations, instead of improving their living standards or increasing consumption.

About 7.8% indicated that they had to postpone education or healthcare expenses. Although this percentage is lower than others, its social and humanitarian implications are significant; delaying medical treatment may worsen health issues, while cutting educational expenditures may affect children's futures and career opportunities.

Thus, the effects of the crisis do not only encompass immediate financial losses, but may also result in long-term losses in health, education, and human capital.

Families Rearranging Their Priorities

The results showed that 64.4% of citizens said that salary delays or reductions led to significant changes in their families' spending patterns, while 19.1% said spending changed to some extent. Thus, 83.5% of families had to rearrange their priorities and consumption patterns.

This result illustrates that the impact of the crisis has transitioned from the level of feeling to actual economic behavior. Families no longer spend in the same way they did before the crisis, but have become more cautious and focused on the most pressing needs.

Changing spending patterns may include buying less food, switching to lower-quality goods, delaying healthcare, reducing education and transportation expenses, postponing bill payments and installments, or increasing reliance on credit purchases.

These behaviors indicate that families have shifted from planning for the future to managing daily needs. Instead of thinking about saving, improving housing, or investing in their children's education, the priority becomes ensuring food provision, paying essential bills, and meeting the most urgent commitments.

Moreover, families' uncertainty about when their salary will arrive or its value leads them to exercise greater caution in consumption, even when they have some money available, reflecting a decline in economic confidence, not just a decrease in income.

From the Treasury to Families and the Market: Diminished Purchasing Power and Deepening Poverty and Unemployment

The survey results reveal that the impact of the clearance crisis quickly transfers from the public treasury to families and the market. When the government's ability to pay salaries and dues to companies regularly declines, the incomes of employees and workers decrease, payments to suppliers and contractors are delayed, and private sector establishments experience increasing liquidity and financing pressures, limiting their ability to meet obligations or continue their usual operations.

Families appear to be the most affected link in this chain, as they are forced to reduce their purchases, postpone installments and expenses, and rearrange their priorities according to the most urgent needs. Also, partial or delayed salaries are often used to pay off previous debts and bills rather than being transformed into new spending, which weakens purchasing power and increases caution and uncertainty in consumption.

The results showed that 80.5% strongly agree that the continued clearance crisis leads to a reduction in the purchasing power of the Palestinian citizen, while 12.1% partially agree, bringing the overall agreement rate to 92.6%.

This result reflects a broad understanding that purchasing power does not depend solely on the nominal value of salaries, but on their regularity, timing of disbursement, and the level of accumulated obligations on families. A part of the salary may arrive weeks late, but it goes to settling prior needs and bills instead of generating sufficient new demand in the market.

This effect does not remain within family budgets; it extends to the market through reduced demand and sales, prompting some companies to cut production, delay investment, or reduce their workforce.

About 75.3% of participants believed that the clearance crisis has significantly contributed to rising levels of poverty and unemployment, while 15.3% said it contributed moderately, and 5% viewed it as contributing minimally. Thus, 95.6% of citizens considered that the crisis has contributed, to varying degrees, to deepening poverty and unemployment.

Thus, families and the market enter into a reciprocal cycle of weakness; declining income limits economic activity, weakened activity reduces job and income opportunities, deepening poverty and unemployment, and increasing reliance on aid and family remittances, before returning the impact to public finances in the form of reduced taxes and local revenues.

From a Financial Mechanism to a Constrained Economic Cycle

The clearance funds were supposed to be a technical mechanism for organizing the collection of Palestinian revenues and their transfer, but over time they have turned into a recurring political and economic pressure tool. Since 2019, deductions and withholdings have intensified, accumulating to about 3.54 billion shekels between 2019 and 2024. The crisis intensified after the outbreak of war in the Gaza Strip in October 2023, when Israel began withholding amounts related to the strip estimated at around $75 million monthly, before the procedures evolved into a near-total suspension of clearance transfers starting in May 2025.

This has plunged the Palestinian public finances into a sharp crisis, forcing the government at various times to pay salaries partially, ranging between 50% and 70%, in addition to delaying dues to companies and suppliers and increasing reliance on bank borrowing. However, the impact of these procedures did not stop at the public treasury, but extended to household income, consumption, and debts, before spreading to markets, the private sector, and the banking system.

The financial chokehold is not limited to the withholding of clearance funds but also relates to the ability of Palestinian banks to manage liquidity in shekels and settle transactions via correspondent banking channels with Israeli banks. When these channels are disrupted or operational margins narrow, daily trade, import payments, the availability of essential goods, and companies' and families' ability to use their funds and conduct transactions are affected. Thus, the withholding of clearance funds, pressure on banking relationships, and complications in the movement of shekels form interlinked issues within a single crisis that impede the flow of money within the Palestinian economy.

This crisis can be understood within the concept of the constrained Palestinian economic cycle. In a normal economy, the government collects revenues and uses them to pay salaries and dues, finance services and projects, which families then spend in markets, increasing sales, expanding production and employment, and returning part of the economic activity to the treasury in the form of new taxes and fees.

However, in the Palestinian case, the starting point in this cycle is subject to an external decision. When clearance funds are withheld or deducted, the government's ability to pay salaries and settle company dues decreases, and family incomes and expenditures decline, leading to reduced private sector sales, weakened production and employment, rising unemployment and poverty, and decreasing local revenues.

When the survey results are read in this framework, it becomes clear that they do not describe separate living effects but reveal successive links in a single contraction cycle that begins with the withholding of revenues and then moves to salaries and family income, from there to expenditures and markets, before reaching production, job opportunities, and public finances.

The crisis does not end with delayed salaries; the weakness in public finances pushes the government to increase borrowing, reducing available resources for financing the private sector, which limits investment, expansion, and employment. As jobs and incomes diminish, demand weakens again, and public revenues fall, thus restarting the contraction cycle.

Thus, the crisis reveals that the Palestinian economy is not only suffering from a temporary liquidity shortage but also from structural constraints that limit its institutions' ability to control the flow of resources and manage its economic cycle independently and naturally.

Key Conclusions and Summary

The results of the Palestinian Center for Policy Research and Survey indicate that the clearance crisis has transformed from merely a financial crisis or salary issue affecting public sector employees into a wide-ranging living and economic crisis whose effects extend to families, markets, the private sector, and the economy as a whole.

The decline in income levels has made families more vulnerable and less able to withstand salary delays or partial payments, forcing many to rely on borrowing and postponing obligations, thus deferring the burdens of the crisis into the future instead of addressing them. Additionally, a significant portion of the delayed or partial salary is directed towards settling previous debts and bills, without generating sufficient new demand in the market, leading to a decline in purchasing power, spending, sales, production, and employment.

Thus, the clearance crisis has become a direct factor in deepening economic contraction, rising poverty and unemployment, and declining public revenues, revealing the fragility of an economy reliant on Palestinian resources over which it does not have complete control over their flow.

Therefore, the full and regular release of clearance funds is essential for protecting economic and social stability, alongside international efforts to halt deductions and withholdings, adopt policies that enhance local production, support small projects, and expand social protection, thereby reinforcing the Palestinian economy's ability to endure and curtail the ongoing cycle of contraction.