PA losing grip on West Bank amid Israeli raids, post-Oct. 7 cash freeze
Analysts say squeezing Ramallah likely to boost rivals Hamas and Palestinian Islamic Jihad, as workers get partial salaries and authorities can’t pay for roads, sewage, medicine
Roads torn up months ago by army bulldozers in the Jenin refugee camp amid operations against terror groups remain unpassable because the Palestinian Authority can’t afford to fix them. Government employees are being paid a fraction of their salaries, and health services are collapsing.
These are all signs of a deep financial crisis that has crippled the administration led by President Mahmoud Abbas in the Israeli-controlled West Bank, prompting questions over its future even as the United States and other countries are pressing for a “revitalized” PA to run the Gaza Strip when fighting there ends.
The PA’s finances have been in disarray for years as donor states have cut back funding that once covered nearly a third of its $6 billion annual budget, demanding reforms to tackle corruption and waste.
But Palestinian officials say they worsened sharply since October 7, 2023, when thousands of Hamas-led terrorists stormed southern Isreal, killing nearly 1,200 people and taking 251 hostages, and sparking the war in Gaza.
Amid the war, Israel has withheld from the PA funds earmarked for Gaza from tax revenue Jerusalem collects on behalf of the PA under the 1993 Oslo Accords.
Finance Minister Bezalel Smotrich halted the transfer in light of what he said was the PA’s support for Hamas’s October 7 terror onslaught and its actions against Israel on the international stage.
The strains are particularly evident in Jenin, a volatile city in the northern West Bank where Israel has long targeted terror operatives and has stepped up operations since October.
Nidal Obeidi, the city’s mayor, said Israeli raids since October have inflicted more damage than in the past on essential infrastructure.
“The water and sewage pipes are hit. Power transformers are shot at, and even water storage tanks on roofs,” Obeidi told Reuters.
He estimated the repairs would cost $15 million in the refugee camp alone. But with the PA “under siege,” he said, resources are scarce.
Roads have been torn up during such raids by engineering forces to neutralize bombs planted by terror operatives against Israeli soldiers.
Palestinian officials say the PA is facing one of its gravest crises since it was created under the Oslo Accords 30 years ago.
At the time, Palestinians saw the PA as a steppingstone toward their goal of an independent state in the West Bank and Gaza with East Jerusalem as its capital.
But as that goal has remained elusive, the salaries and services provided by the PA have helped keep Abbas and his Fatah faction politically relevant in the face of expanding Israeli settlements in the West Bank and challenges posed by armed rivals such as Hamas, which seized Gaza in 2007.
Ghassan Khatib, a lecturer at Birzeit University in the West Bank who once served as a Palestinian minister, said Israeli policies risked further marginalizing the PA “and at a certain point in time might cause its collapse.”
“They have the effect of reducing the political weight of factions that support a peaceful settlement with Israel — namely Fatah — in favor of the opposition groups, mainly Hamas,” he said.
The office of Prime Minister Benjamin Netanyahu and the PA did not comment on Khatib’s remarks.
However, Hussein al-Sheikh, a senior Palestinian official, told Al Arabiya TV in June that the shortfall in funding meant the PA could not “do its duties towards the Palestinian people,” which could lead to the “collapse of the Palestinian Authority.”
Warning of another intifada
The West Bank and East Jerusalem are home to over three million Palestinians, and, according to Israeli authorities, some 700,000 Israeli settlers. Israeli security forces control the West Bank, although the PA exercises limited governance of areas where most of the Palestinian population lives.
Under a longstanding arrangement between the sides, Israel collects taxes on goods that pass through Israel into the West Bank and makes monthly transfers to authorities in Ramallah.
Following the October 7 attacks, Smotrich began withholding a portion of those revenues equal to the amount transferred by the PA to Gaza, where the Abbas-led administration has continued financing services, salaries and pensions since Hamas took over. Smotrich argued the funds would end up in Hamas’s hands.
The finance minister has also accused the PA of failing to condemn the October 7 attacks. Abbas has generally condemned violence against civilians and criticized Hamas’s raid as giving Israel an excuse to attack Gaza, but the PA never issued a full-throated condemnation of the atrocities committed by Hamas.
The amount withheld — approximately NIS 300 million ($80 million) a month — added to previous deductions imposed by Israel equivalent to amounts paid by the PA to the families of terrorists and those jailed or killed by Israeli authorities, which Israel argues serves as direct encouragement of terrorism.
In May, Smotrich suspended transfers altogether, accusing the PA of working against Israel after the International Criminal Court prosecutor sought arrest warrants against its prime minister and defense minister, and three European countries recognized a Palestinian state.
“The Palestinian Authority joined Hamas in trying to harm Israel, inside Israel and around the world, and we will fight it,” Smotrich said at a June 27 cabinet meeting.
Smotrich, who also controls Israeli civilian affairs in the West Bank under the coalition agreements, released some funds in a quid pro quo deal that saw the government legalize five West Bank outposts. Israel transferred NIS 435 million ($116 million) to the PA in early July, but Palestinian officials say Israel is still holding NIS 6 billion ($1.6 billion) of its funds.
“What was transferred was not enough to pay 60% of the salaries, and therefore the financial crisis is ongoing,” Mohammad Abu al-Rub, a PA spokesperson, told Reuters. “Israel deducts around two-thirds of the revenue, and this puts all the government plans on hold and increases public debt.”
The Finance Ministry said it is prohibited by law and a cabinet decision from transferring funds that would be sent to Gaza and “flow into terrorism.” It said the amount withheld was “not even close” to NIS 6 billion, adding in a statement to Reuters: “If the Palestinian Authority does not transfer funds to finance terrorism, there will be no harm” to its economy.
The US says the funds belong to the PA and has urged Israel to release them, while also pressing the PA to implement reforms to prepare it to administer Gaza after the war — an idea Netanyahu has repeatedly rejected.
“The viability of the Palestinian Authority is essential to stability in the West Bank, which in turn is essential to Israel’s own security interests,” Vedant Patel, a US State Department spokesperson, said at a July 2 news conference.
The IDF has warned the government that cutting off funds to the PA could push the West Bank into another “intifada” — the name used for two violent Palestinian uprisings between 1987 and 2005 — according to a June report by public broadcaster Kan that was confirmed to Reuters by an Israeli official.
The military referred Reuters at the time to the Shin Bet internal security service, which declined to comment.
Netanyahu’s office did not answer questions for this article.
‘Nobody is helping’
The financial pressure on the PA comes as economic and security conditions in the West Bank have deteriorated sharply, further eroding support for Abbas’s administration, which last held parliamentary elections 18 years ago and which many Palestinians view as wholly corrupt.
More than 60% of Palestinians now support the PA’s dissolution, according to an opinion poll published by the Palestinian Center for Policy and Survey Research in June, which also found support for armed struggle had risen.
The PA pays salaries or pensions to 150,000 people in Palestinian territories. The last time it paid them in full was in 2022. In March and April, it says, PA employees received 50% of their salaries. In May, they got 60%.
Adding to the economic hardship in the West Bank, Israel has since October 7 denied entry to some 200,000 Palestinians who used to commute daily to work in Israel, citing concerns of further attacks.
Kathem Harb, a 53-year-old father of four who works in the PA’s national economy ministry, said he could only afford basics like rice, flour and cooking gas.
“We live on the bare minimum,” he said, adding there was no money sometimes for water and electricity bills.
Cuts to PA salaries mean staff at government clinics only show up to work a couple of days each week, according to health worker unions. Around 45% of essential medications are out of stock, the World Health Organization said last month.
Hayat Hamdan, a woman in her fifties, had traveled 10 kilometers (six miles) from the town of Arraba to a government clinic in Jenin in hopes of finding subsidized medication for her wheelchair-bound husband. But inside, many of the pharmacy shelves were empty.
“We have health insurance, but it is of no use,” Hamdan said. “Since the start of the Gaza war until today, we are buying most medicines at our own expense.”
Meanwhile, raids by groups of extremist Israeli settlers on Palestinian villages have mushroomed, while attacks by Palestinians in the West Bank and East Jerusalem have killed more than a dozen Israelis.
Since October 7, more than 560 West Bank Palestinians have been killed, according to the PA health ministry. The IDF says the vast majority of them were killed during clashes with gunmen amid raids or were terrorists carrying out attacks.
During the same period, 22 Israelis, including security personnel, have been killed in terror attacks in Israel and the West Bank. Another five members of the security forces were killed in clashes with terror operatives in the West Bank.
In the Jenin refugee camp — where some 14,000 people live packed into an area of less than half a square kilometer — young men carrying assault rifles patrol streets in open defiance of the PA, underlining the sway terror groups such as Hamas and Palestinian Islamic Jihad still have despite Israeli raids.
Bullet marks on the facade of the nearby PA headquarters offer a reminder of past clashes between PA security forces and armed assailants.
A man in his 20s, who asked to be identified only as Mohammed for safety reasons, said conditions in the camp were bad before October 7 due to the Israeli raids and had gotten a lot worse since.
“There are no roads; the infrastructure is destroyed; homes are destroyed; shops are destroyed,” he said, expressing frustration with the PA for cracking down on its enemies while doing little for Palestinian civilians.
“There is no work; the authority isn’t paying salaries; the prices are going up. Nobody is helping the people of the camp.”
