‘Economic warfare?’ In the West Bank, too much cash is breaking the Palestinian economy

The Palestinian banking system in the West Bank is grappling with an unusual problem: an overabundance of Israeli shekels, leading to a cash crisis that is disrupting daily life and economic activity.

Gas stations are refusing cash payments, and banks are unable to accept further deposits because their vaults are overflowing. This situation stems from a dispute between the Bank of Israel and the Palestinian Monetary Authority. Israel imposes limits on the amount of physical currency it will take back from the West Bank, a cap that Palestinian officials argue has not kept pace with economic growth and serves as a tool to maintain the territory's economic distress.

Unlike Gaza, which suffers from cash shortages due to a blockade, West Bank banks are running out of storage space for the sheer volume of shekels. The inability to convert this physical currency into electronic balances prevents commercial banks from paying suppliers or processing customer transfers.

Mohammad Manasra, deputy governor of the Palestinian Monetary Authority, described the situation as banks being "shackled" and called the Israeli policy "economic warfare." The Palestinian economy heavily relies on the Israeli shekel, with transactions often conducted in physical currency. More shekels enter the West Bank than Israel allows out, partly because employers in Israel and its settlements pay Palestinian laborers in cash, and Israeli citizens purchase goods in the West Bank, bringing more currency in.

This surplus cash accumulates in Palestinian banks, earning no interest and remaining unavailable for loans, investments, or bill payments, further hindering economic development.

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The banks have been shackled in their ability to deal with the crisis. What is being practiced in the West Bank is economic warfare.