What it is about
Palestinian teenagers engaged in activities at the Palestinian Circus School in Ramallah, face indirect impacts due to potential new financial policies from Israel’s far-right government. The school’s director highlights financial hurdles exacerbated by complex bureaucratic processes.
Why it matters
Israel’s economic policies play a significant role in shaping the financial stability and daily operations in the Palestinian territories. With Finance Minister Bezalel Smotrich proposing changes that could sever crucial banking ties, there is heightened concern over potential economic repercussions.
The Big Picture
Banking in the Palestinian territories is challenging due to scrutiny over potential terror financing, affecting transaction speeds and financial operations. Since Israel controls the West Bank, two Israeli banks ensure transactional functionality in the area. Any disruption to this system could have profound impacts on both economies.
Smotrich’s Economic Moves
In response to the Hamas attack on October 7, Israel has imposed strict economic curbs on the Palestinian Authority (PA), including withholding tax revenues collected on PA’s behalf. Finance Minister Smotrich redirected $35 million of these funds to families of terror victims, which faced international condemnation.
How It Affects Businesses
If the banking waiver allowing transactions with Palestinian banks is terminated, Israeli firms would face difficulties receiving money and depositing checks from Palestinian banks. This would sever integral business ties and disrupt trade worth billions annually.
Humanitarian Concerns
The current transaction mechanism handles $8 billion annually in imports for essential goods like water and food. Terminating banking relationships could affect Palestinian livelihoods, push towards a humanitarian crisis, and destabilize the West Bank’s economy.
Global Reactions
U.S. Treasury Secretary Janet Yellen and European diplomats have voiced concerns over the adverse impacts of severing the banking route. Western governments fear these policies could weaken the PA and destabilize the region.
Internal Perspectives
On-ground Palestinian businessmen report significant income falls since the continued conflict, attributing economic hardships to restrictive Israeli policies. These policies are seen as efforts to indirectly push Palestinians out of the West Bank.
Contemplating Changes
Economic experts and authorities within the Palestinian territories are considering alternatives like adopting a digital currency to bypass the dependency on the Israeli shekel. This calculated response aims at long-term economic resilience and sovereignty.
This story was first published on timesofisrael.com.