Israel announced plans to use tax revenue collected on behalf of the Palestinian Authority (PA) to settle the PA’s debt of nearly 2 billion shekels ($544 million) to the Israel Electric Corporation (IEC). Finance Minister Bezalel Smotrich made the announcement during a cabinet meeting on Sunday.
Under a long-standing arrangement, Israel collects taxes on goods passing into the occupied West Bank and transfers the revenue to the PA. However, since the October 2023 Hamas-led attack on Israel, Israel has withheld 800 million shekels designated for Gaza administration expenses.
Allocation of Withheld Funds
The withheld funds, frozen in a Norwegian account, will now be directed to clear the PA’s electricity-related debts and other energy expenses. According to Smotrich, these measures were necessary due to “anti-Israeli actions,” including Norway’s unilateral recognition of a Palestinian state.
The Palestinian Finance Ministry confirmed that 767 million shekels of the funds would pay Israeli fuel companies for ongoing fuel purchases, while another portion would settle electricity debts owed to IEC.
Impact of Financial Measures on the Palestinian Authority
Smotrich opposes sending funds to the PA, accusing it of supporting Hamas-led attacks. He also criticized the PA for using tax revenues to pay public sector wages and “martyr payments” to families of militants or civilians killed or imprisoned by Israel.
As a result of Israel’s deductions, the PA now pays only 50-60% of public sector salaries. The ministry reported that Israel has withheld over 3.6 billion shekels as of 2024, exacerbating the PA’s financial crisis.
International Concerns and Ongoing Efforts
The Palestinian Finance Ministry is working with international partners to release the remaining withheld funds, totaling 2.1 billion shekels. It emphasized that these financial measures severely impact the government’s ability to manage Gaza allocations and maintain essential services.
