A Glimmer of Hope in Confronting the "Dismantling" Project.. The Palestinian Authority's Plans for Financial Resilience Linked to a "Political Unknown"

Report by SadaNews: We are nearing a full year without the public treasury receiving a single shekel from the clearance funds, which constitute about 68% of the total revenues of the Palestinian Authority. All discussions about pressures on the Israeli side to release these funds have been nothing but a smokescreen.

The picture has become as clear as a sun disk shining in the midday. The Israeli government has made up its mind by announcing a clear project to "dismantle" the Palestinian Authority and redraw the political scene in the West Bank anew.

Statements have been made multiple times by the extremist Israeli Minister of Finance Bezalel Smotrich and Minister of Industry Nir Barkat, publicly and explicitly, without any denial from the Israeli Prime Minister's office. Even if the talk "is not subject to customs duties" as they say, the actions on the ground support this direction, not only by continuing to withhold the clearance funds but also by implementing a government-sponsored settlement policy to raise lawsuits in Israeli courts to compensate settlers for operations carried out by Palestinian factions, some of which date back over 20 years. The Palestinian Authority estimates that these lawsuits range from 45 to 60 billion shekels, while the withheld clearance funds amount to between 16 and 17 billion shekels. This means that the expected compensation in practical terms is equivalent to three or four times the amount of the withheld funds, indicating that the inevitable outcome of this equation is a certain "drying up" of the Palestinian Authority's core financial resources, and that the release of those funds has become a "thing of the past."

In light of this, the Palestinian Authority is working to stabilize its pillars in a war that it fully recognizes is existential, aimed at preventing the "oxygen of life" from reaching it. Thus, it has sought local steps and margins through settlements with local entities and companies or through borrowing from the banking sector and local funds, in addition to relying on some foreign aid to maintain its existence throughout the past period. However, these margins are shrinking day by day, leading to further tightening of space and exhausting solutions without the release of the clearance funds or the establishment of an international safety net, which the Authority has called for multiple times but has not seen the light of day. Despite the improvement in international aid over the last two years compared to previous years, it has not constituted an alternative to the Authority's main revenue. The volume of international aid that reached to support the public budget last year was about 1.62 billion shekels, which is not enough to pay full salaries since the monthly salary bill and similar salaries amounts to about a billion and fifty million shekels.

With the suspension of external aid at the beginning of this year, the Palestinian Authority found itself in an unprecedented financial situation, relying solely on local revenues, which do not amount to between 300 and 350 million shekels monthly, while they were exceeding 400 million shekels before October 7, 2025. This means that the Palestinian Authority is now relying on revenues that are insufficient for more than 20% of the estimated expenses, which are usually around 1.5 billion shekels monthly.

Faced with this situation, which indicates an impending financial collapse, the Palestinian Authority had to resort again to securing banking facilities guaranteed by checks obtained in the context of local settlements, before the joyous Eid al-Fitr to disburse 50% of salaries with a minimum of two thousand shekels. However, the Palestinian government, as well as the banking sector, now recognize that this solution is an exception that cannot be repeated each month with the increasing size of governmental loans and its inability to meet its obligations. Amidst the fragility of the guarantees provided, how will the government manage its affairs in the coming months?

According to informed sources for SadaNews, it has become clear that the government is forced to deal with the existing crisis with completely different data than all the previous period, and it has developed a vision to remain stable until the end of this year based on its available revenues. This vision relies on operating a contingency budget (cash flows), meaning that expenditure should be monthly based on available cash flows, which would exempt the Authority from working on its due obligations, whether for salaries or operational expenses. Sources confirm to SadaNews that the government is fully convinced of the necessity to reduce operational expenses by half or to a third, focusing on the core issues in only three sectors: health, education, and security. Additionally, there are government trends to open talks with the banking sector in an attempt to delay servicing public debt, which amounts to about 320 million shekels monthly, by postponing the repayment of the loan principal for several years in exchange for providing the banks with bonds with higher interest rates and only maintaining interest payments, which grants higher financial flexibility and reduces the government's monthly obligations towards the banking sector. However, this remains merely an intention and has not yet reached the level of an agreement, as banks may demand stronger guarantees, such as collateralizing loan repayments with sovereign assets.

The Palestinian Authority clings to a glimmer of hope through the second half of the year, as it is expected to receive aid from the European Union and other funds from the World Bank in advance, in addition to attempts to garner more aid either from the Kingdom of Saudi Arabia, which had previously pledged additional assistance, or from others. This is what the Authority is betting on to secure at least 50% of salaries until the end of the year. However, the possibility of securing payments at higher rates remains very distant according to current data, and forecasts indicate the difficulty of securing this percentage during the next two months (April and May), while it is expected that the government will secure a payment of less than 50% by the end of April, and another before Eid al-Adha, with the possibility of changing that according to developments.

The Palestinian Authority fully acknowledges that the possibility of releasing the clearance funds this year has become nearly impossible, and its bet is directed toward maintaining its existence and preventing its collapse until the end of the year. Afterwards, it relies on political factors that remain in the realm of the "unknown," including the holding of Israeli elections at the end of the year and the emergence of a government that may open a political horizon with the Authority, which is not guaranteed. The second factor is whether the midterm elections in the United States could curb President Donald Trump's influence, in addition to the dissipating smoke of war regionally and preparing the conditions for political settlements and a period of stability. However, the question remains: What if the Israelis return through the ballot boxes to a right-wing government or if the elections do not produce a party willing to engage with the Palestinian Authority? In reality, no one within the Palestinian political system has an answer to that.