The Palestinian Economy Is Struggling. In the West Bank, the Problem Is Too Much Cash

The West Bank, a territory under Israeli occupation, faces an unusual challenge: too much money. Sounds counterintuitive, but having excess cash can be a crippling burden for Palestinians living in the West Bank.

The issue stems from the complex economic relationships between Israel and the Palestinian territories. For decades, the Israeli shekel has been the dominant currency, with trade and financial transactions heavily reliant on it. As more cash flows into the territory from Israel – whether through employers paying Palestinian laborers or citizens purchasing goods in the West Bank – excess liquidity has grown exponentially.

Palestinian banks accumulate an estimated 30 billion shekels annually, exceeding the 18 billion shekel limit imposed by Israel. This surplus, neither earning interest nor being converted into loans and investments, sits idle within bank vaults. The consequences are severe: commercial banks struggle to store the cash, paying for expensive storage facilities and insurance; businesses accept fewer deposits from clients; and public sector workers remain unpaid due to delayed transfers.

At its root, this crisis is a result of Israel’s economic control over the West Bank. By limiting the amount of shekels it accepts back from Palestinian banks, Israel effectively strangles the economy. This is a deliberate policy aimed at maintaining control and exploiting Palestinians economically. Israeli Finance Minister Bezalel Smotrich threatened in September 2025 that “economic strangulation” would be used to prevent a Palestinian state.

The humanitarian implications are stark. The West Bank’s fuel and electricity supplies, which rely on imports from Israel or purchases from Israeli utilities, are constantly at risk of being cut off due to the cash crisis. Deputy Governor of the Palestinian Monetary Authority Mohammad Manasra noted that this has direct consequences for government services, industrial sectors, and the population as a whole.

Increased home raids by Israeli soldiers have exacerbated the situation, leading Palestinians to deposit more money into banks, fearing confiscation. This cash hoarding only worsens the problem, reducing lending opportunities and further crippling the economy.

Israel’s actions are widely seen as a form of economic warfare, designed to strangle Palestinian development and maintain its grip on the occupied territories. The International Monetary Fund estimated in 2022 that excess cash reduced Palestinian banks’ profits by about 20%. This figure is likely higher today.

The West Bank’s predicament raises questions about the true nature of Israel’s intentions towards the Palestinians. By restricting economic growth, limiting opportunities for development, and maintaining control through manipulation of currency flows, Israel further entrenches its occupation. The world must take notice: this is not merely an economic crisis but a manifestation of Israel’s broader policy to maintain dominance over Palestine.

A fundamental shift in Israeli policy towards Palestinians is required to alleviate the suffering in the West Bank. Until then, the cash crisis will persist, symbolizing the entrenched inequality and exploitation that define life under occupation.