Squeezed by Israel, Palestinian Authority disappears in West Bank

Roads destroyed months ago by Israeli army bulldozers in the Jenin refugee camp remain impassable because the Palestinian Authority is unable to make repairs. Civil servants are receiving a fraction of their salaries and health services are collapsing.

These are all signs of a deepening financial crisis that has paralyzed President Mahmoud Abbas’s administration in the Israeli-occupied West Bank, raising questions about its future even as the United States and others push for a “revitalized” PA to run the Gaza Strip once fighting in the enclave ends.

The PA’s finances have been in disarray for years as donor states have slashed funding that once covered nearly a third of its $6 billion annual budget, requiring reforms to combat corruption and waste.

But Palestinian officials say the situation has worsened dramatically since the militant group Hamas attacked Israel from Gaza on October 7, prompting Israel to withhold a portion of the tax revenues it collects on the PA’s behalf, which are now its main source of funding.

Tensions are particularly evident in Jenin, a volatile city in the northern West Bank where Israel has long targeted Palestinian militants and has stepped up operations since October.

Palestinian officials say the PA is facing one of its most serious crises since it was created under interim peace deals with Israel 30 years ago.

At the time, Palestinians saw the PA as a stepping stone to their goal of an independent state in the West Bank and Gaza, with East Jerusalem as its capital.

But because 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 Israeli settlement expansion in the West Bank and challenges posed by militant rivals like Hamas, which seized Gaza in 2007.

Prelude to another Intifada

The West Bank and East Jerusalem are home to more than 3 million Palestinians and, according to the UN, about 700,000 Israeli settlers. The Israeli military controls the West Bank, although the PA exercises limited governance in areas where the bulk of the Palestinian population lives.

Under a long-standing agreement between the parties, Israel collects taxes on goods passing through Israel into the West Bank and makes monthly transfers to authorities in Ramallah.

After the October 7 attack, Israel’s far-right finance minister, Bezalel 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 to fund services, salaries and pensions ever since. Smotrich argues that the funds would end up in the hands of Hamas.

The amount withheld – approximately 300 million shekels ($80 million) per month – was in addition to previous deductions imposed by Israel equivalent to amounts paid by the PA to the families of militants and civilians arrested or killed by Israeli authorities.

In May, Smotrich suspended the transfers altogether, accusing the PA of working against Israel after the International Criminal Court prosecutor requested arrest warrants for its prime minister and defense minister, and three European countries recognized a Palestinian state.

Smotrich also accused the Palestinian Authority of supporting the Oct. 7 attack, in which Hamas-led gunmen killed 1,200 people in Israel and took more than 250 hostages, according to Israeli records. Gaza health officials say the offensive launched by Israel in response killed more than 38,700 people.

Israel transferred 435 million shekels ($116 million) to the PA in early July, but Palestinian officials say Israel still holds 6 billion shekels of its funds.

“What was transferred was not enough to pay 60 percent of salaries and therefore the financial crisis continues,” Mohammad Abu al-Rub, a PA spokesman, told Reuters. “Israel deducts about two-thirds of the revenue, and this suspends all government plans and increases public debt.”

Israel’s Finance Ministry said it was forbidden by law and a cabinet decision to transfer funds to Gaza that would “flow to terrorism”. It said the amount withheld was “nowhere near” 6 billion shekels, adding in a statement to Reuters: “If the Palestinian Authority does not transfer funds to finance terrorism, there will be no harm” to the 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 that would prepare it to administer Gaza after the war – an idea Netanyahu has repeatedly rejected.

The Israeli military has warned its government that cutting funding to the PA could push the West Bank into another “intifada” – the name used for two Palestinian uprisings between 1987 and 2005 – according to a June report by public broadcaster Kan Radio that was confirmed to Reuters by an Israeli official.

At the time, the military referred Reuters to the Shin Bet security service, which declined to comment.

Netanyahu’s office did not respond to questions for this article.

“Nobody is helping”

The financial pressure on the PA comes at a time when economic and security conditions in the West Bank have deteriorated sharply, further undermining support for Abbas’s administration, which last held parliamentary elections 18 years ago. Many Palestinians view it as corrupt.

More than 60 percent of Palestinians now support the dissolution of the PA, according to an opinion poll published by the Palestinian Center for Policy and Research in June, which also found that support for armed struggle had increased.

The Palestinian Authority pays salaries or pensions to 150,000 people in the Palestinian territories. It last paid them in full in 2022. In March and April, it says, PA employees received 50 percent of their salaries. In May, they got 60 percent.

Adding to the economic hardships in the West Bank, Israel has blocked access to some 200,000 Palestinians who used to commute to work in Israel, citing security concerns.

PA pay cuts mean government clinic staff only show up for work a few days a week, according to health workers’ unions. About 45% of essential medicines are out of stock, the World Health Organization reported last month.

Hayat Hamdan, a woman in her fifties, traveled 10km from the town of Arraba to a government clinic in Jenin, hoping to find subsidized medicine for her husband, who is in a wheelchair.

But inside, many of the pharmacy shelves were empty.

“We have a health system, but it’s no use,” Hamdan said. “From the beginning of the war in Gaza until today, we have bought most of the medicines at our own expense.”

Violence has surged across the West Bank. Hundreds of Palestinians – including armed fighters, stone-throwing youths and bystanders – have been killed in clashes with Israeli security forces since October.

Attacks by Israeli settler groups on Palestinian villages have become common, while attacks by Palestinians in the West Bank and East Jerusalem have killed more than a dozen Israelis.

In the Jenin refugee camp — home to some 14,000 people crammed into an area of ​​less than half a square kilometer — young men carrying assault rifles patrol the streets in open defiance of the Palestinian Authority, underscoring the influence that militant groups like Hamas and Islamic Jihad still wield despite Israeli attacks.

Bullet marks on the facade of the nearby PA headquarters are reminders of past clashes between PA security forces and militants.

A man in his 20s, who asked to be identified only as Mohammed for security reasons, said conditions in the camp were bad before October 7 due to Israeli strikes and had worsened significantly since then.

Almost the entire population of Gaza has been displaced amid the new Israeli offensive