West Bank economy strained by excess cash due to Israeli restrictions

In the Israeli-occupied West Bank, a peculiar problem is disrupting daily economic life: an excess of cash. Palestinian banks are reportedly drowning in Israeli shekels, to the point where they are refusing cash deposits and residents are finding it increasingly difficult to spend physical currency.

The core of the issue lies in a dispute between the Bank of Israel and the Palestinian Monetary Authority. Israel imposes limits on the amount of physical currency it will accept back from the West Bank. Palestinian officials argue that this cap has not kept pace with economic growth and serves as a tool to maintain the territory's economic crisis.

Unlike Gaza, which suffers from cash shortages due to blockades, West Bank banks are struggling with the opposite problem – a surplus of cash with nowhere to store it. Because the Bank of Israel is unwilling to accept more notes and coins, commercial banks cannot convert this physical currency into electronic balances. This prevents them from paying suppliers, processing customer transfers, or engaging in other essential financial transactions.

“

The banks have been shackled

Mohammad Manasra, deputy governor of the Palestinian Monetary Authority, told The Associated Press that the banks are "shackled" by this crisis. He characterized the situation as "economic warfare" being practiced against the West Bank. The Palestinian economy heavily relies on the Israeli shekel, and more cash enters the territory than Israel allows out.

This influx occurs as employers in Israel and its settlements often pay Palestinian laborers in cash. Additionally, Palestinian citizens of Israel frequently purchase goods in the West Bank, bringing more shekels into the territory. The surplus cash accumulates in Palestinian banks, earning no interest and unable to be used for loans or investments. Israel's annual limit for cash transfers from the West Bank's banking system is 18 billion shekels, while banks are estimated to accumulate around 30 billion shekels annually, according to economist Moayad Afaneh.

“

What is being practiced in the West Bank is economic warfare.