Israel has approved the transfer of 4.5 billion shekels (about 1.5 billion dollars) from Palestinian banks, in a move that Palestinian Monetary Authority Governor Yahya Shanar said was important to implement immediately to bolster liquidity and support banking services. The report did not specify the date of the approval.
Annual cash-transfer shortfall
Al Jazeera correspondent in Nablus Montaser Nassar said the approval represented a partial solution, as Israel sets the transfer ceiling at 18 billion shekels a year, while the 14 banks in the West Bank and Gaza need to transfer 28 billion shekels annually.
Nassar said the shortfall was causing shekels to accumulate in bank vaults, leaving banks to bear the costs of security, insurance and transportation, in addition to losing the potential returns from putting those funds to work.
Withheld clearance revenues squeeze salaries and services
According to Nassar, the cash surplus coincides with Israel withholding about 900 million shekels a month in clearance revenues (about 255 million dollars) for 16 months, weakening the Palestinian Authority’s ability to pay its employees’ salaries.
Former Monetary Authority Governor Feras Milhem said the transferred amount covered only the needs of the final quarter, explaining that cash transfers were used to settle bills for basic goods and services imported from Israel, including 95% of electricity needs and 35% of water supplies.
An explicit breach of the arrangements, as the Bank of Israel is not legally entitled to refuse to receive the currency it issues
High banking assets and widening fiscal deficit
Banking sector assets exceeded 26.8 billion dollars at the end of the first quarter of 2026, but clearance revenues account for 70% of the Authority’s revenues, while the World Bank warned that the fiscal deficit could rise to 4 billion dollars.
In June, Israel’s Knesset announced that it had approved a law to freeze and confiscate Palestinian clearance revenues, which the Palestinian Authority described as an expansion of the “theft of the Palestinian people.” According to the report, the law places the deductions within a legal framework instead of leaving them subject only to a minister’s instructions.
Background on the clearance system
Israeli courts have in recent years ordered the Palestinian Authority to pay compensation worth tens of millions of dollars to Israelis who claim to have been harmed by Palestinian attacks.
Under the Paris Economic Protocol, an annex to the Oslo Accords signed in 1994 between Israel and the Palestinian Authority, Israel’s Finance Ministry collects clearance revenues at border crossings and receives 3% of the total amount collected in return, worth up to about 380 million shekels (102 million dollars) annually.
Clearance revenues are taxes on goods imported into the Palestinian side from Israel or through border crossings controlled by Tel Aviv. Israel collects them on behalf of the Palestinian Authority in Ramallah. Beginning in 2019, Israel decided to deduct amounts from these revenues, worsening the financial crisis and weakening the Authority’s ability to pay its employees’ full salaries.
