Strengthening Financial Resilience in Palestine - Policy Brief (2)
Palestine’s financial sector is under mounting pressure, most recently exacerbated by the Israeli Finance Minister’s threat to terminate correspondent banking arrangements between Israeli and Palestinian banks, contrary to Israeli commitments made in 2024 to the Group of 7 and the US Treasury in particular. While this decision has yet to be tabled for Israeli Government approval, the looming threat sent shockwaves through the Palestinian economy, prompting banks to limit their acceptance of Israeli shekel deposits in light of the excess cash buildup and anticipation of future disruptions. As a result, individuals and families face growing uncertainty and bear the consequences of such arbitrary decisions.
Palestinian banking institutions, like the population they serve, remain highly vulnerable to political shocks, coercive Israeli measures, and deep structural constraints. Palestinian financial inclusion remains a work in progress. While the ultimate solution lies in ending occupation and securing Palestinian sovereignty, immediate interventions can help to strengthen institutional resilience, reduce dependency, and prepare the foundations for long-term monetary autonomy. This requires bold policy shifts, international support, and a renewed commitment to building a people- and community-centred, inclusive financial system.
In December 2024, the Palestine Economic Policy Research Institute (MAS) convened an International Academic Symposium on Priorities for Palestine’s Economy in the Midst of War. One of the papers presented, Managing Banking and Money under Occupation (Hinn and Harker, 2024), offered a range of policy recommendations aimed at strengthening the resilience of the banking system to better serve the interests of the Palestinian population. This policy brief draws on that paper’s insights as well as subsequent feedback from Symposium discussant Professor Heiner Flassbeck to help strategize the Palestinian responses to the increasing risks posed by Israeli punitive financial measures.