Israel Freezes USD200M in Funds to Palestinian Authority

(MENAFN) Israel moved Monday to suspend the transfer of clearance revenues to the Palestinian Authority, slashing approximately $200 million in disbursements this month alone — a sweeping financial blow that threatens to push the Ramallah-based administration deeper into fiscal collapse.

A communiqué from the office of Israeli Finance Minister Bezalel Smotrich stated that the overwhelming share of tax revenues collected by Israel on the Palestinian Authority's behalf had been redirected to settle a backlog of unpaid obligations.

"Out of a total of more than 740 million shekels ($248 million) collected this month, extensive deductions totaling approximately 590 million shekels ($197.7 million) were made," the statement said.

"These funds were redirected to cover the Palestinian Authority's accumulated debts to the Israel Electric Corporation, water utilities, and environmental bodies," it added.

The remaining balance was not transferred, the statement confirmed, describing the freeze as part of a deliberate policy championed by Smotrich since last year — one explicitly designed, according to his office, "to protest steps taken by the Palestinian Authority against Israel in international institutions."

Clearance funds represent import taxes levied on goods entering Palestinian territories — whether through Israel or border crossings under Tel Aviv's control — which Israel collects on Ramallah's behalf and is obligated to remit.

Since 2019, however, Israel has repeatedly dipped into those revenues for a range of stated reasons, steadily eroding the Palestinian Authority's financial footing and leaving it chronically unable to meet public sector payroll obligations while debts to private creditors and local banks continue to mount.

The scale of the accumulated shortfall came into sharp focus in February, when Palestinian Finance Minister Istefan Salameh disclosed that Israel was sitting on roughly 13 billion shekels ($4.4 billion) in withheld Palestinian clearance revenues.

Israeli Channel 7 framed Monday's action in political terms: "The Israeli move is a continuation of Smotrich's firm political and economic stance toward the Palestinian Authority."

Palestinian Prime Minister Mohammad Mustafa had sounded the alarm a day earlier, painting the fund withholding as one component of a broader campaign of economic asphyxiation targeting not only Gaza but also the West Bank. "The Israeli occupation's blockade is not limited to the Gaza Strip, but is also working to choke the West Bank, including East Jerusalem, through political, security and settlement tools, in addition to the continued deduction of Palestinian clearance funds," he said Sunday.

Mustafa further warned that the situation had dramatically deteriorated over the past year: "These deductions have escalated over the past 12 months, as Israel has not transferred any tax and customs revenues to the Palestinian treasury," adding that the measures amount to "another form of occupation."

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