Abbas Wages Financial War on Hamas as PA Faces Financial Crisis

The PA's new found purpose is to prevent Hamas from regaining power in Gaza and the financial collapse of the PA in the West Bank.

Last week, with little media attention, Palestinian President Mahmoud Abbas announced that the Palestinian Authority (PA) is facing a de facto financial crisis. In a presidential decree, Abbas ordered financial institutions to renegotiate existing debt obligations, offering extended repayment terms and reduced fees and interest on penalties for those unable to pay. This move indicates that the PA will not enforce any court rulings on defaults or financial compensation, signaling a challenging year ahead for the PA’s financial system, which is facing bankruptcy risks due to heavy debt and increasing financial pressure from Israel and the cost of Gaza war. If the situation worsens, it could lead to the PA's collapse, weakening Fateh's control—something both Israel and Hamas might see as advantageous.

West Bank Financial Landscape

These new measures are said to aim at alleviating the financial burdens facing Palestinians in the West Bank, where, according to the Palestinian Central Bureau of Statistics, the economy declined by over 19% in 2024. The primary contributor to this downturn has been the financial warfare following October 7, including Israel's refusal to accept shekel deposits from Palestinians, the ban on Palestinian labour in the occupied territories, and trade disruptions between Israel and Palestine. These factors have contributed to a doubling of unemployment, which is now estimated at 35%. Israel appears determined to capitalise on this impending crisis, as demonstrated by recent statements from Israeli Finance Minister Bezalel Smotrich, who announced that Israel would seize nearly $225 million in tax revenue owed to the PA, using the funds to settle the PA’s outstanding debt to the Israeli state-run electricity company, Israel Electric Corporation (IEC), which is estimated at $544 million. These funds have been frozen in Norway since 7 October. In response, the new decree grants the Palestinian Monetary Authority and the Capital Market Authority the authority to regulate and guide financial institutions on how to manage loans and debt repayments. These institutions include banks, financial lending institutions, and leasing companies.

Gaza Reconstruction and Recovery and the Financial War on Hamas