Shekel Accumulation Crisis.. A Real Threat of Further Economic Contraction

Dr. Moayad Afaneh: The size of the Palestinian economy has doubled since the signing of the Paris Protocol, and Israel still receives about 18 billion shekels annually, which is not commensurate with economic growth. Yassin Dweikat: The protests are to send an urgent message to the competent authorities about the necessity of intervention to alleviate the effects of the crisis before entering a more dangerous and unbearable stage. Khaled Sarahneh: The banks' refusal to accept shekel deposits practically means that station owners are unable to pay for fuel, which threatens the continuity of their activity. Dr. Thabet Abu Al-Rous: Traders are now facing difficulties in transferring the prices of goods to Israeli suppliers, which threatens supply chains and slows down economic growth with effects that may extend for years. Ayham Abu Ghosh: The crisis of shekel accumulation in bank vaults is not internal, and efforts must be directed to pressure the Israeli side to receive the surplus currency. Ikhlas Tamliyeh: The continuation of the crisis without radical solutions will lead to an increased reliance on informal cash transactions, thus expanding the unregulated economy. Ramallah – Exclusive to "Al-Quds" – Fears are growing about the exacerbation of the shekel accumulation crisis in banks operating in Palestine, amid increasing economic warnings about its repercussions on the banking sector, the private sector, and citizens, with a consensus that the roots of the crisis go beyond banking and technical aspects and are linked to Israeli restrictions imposed on receiving the surplus Israeli currency, which threatens to deepen the state of recession and pressures experienced by the Palestinian economy, while the protests recently witnessed in the West Bank by commercial and industrial chambers and gas station owners deepen the crisis. Union officials and economic experts explain, in separate interviews with "Al-Quds", that the volume of shekels accumulated in Palestinian banks has reached unprecedented levels, which has led to tightened procedures for deposits and issuing checkbooks, hindered trade and import financing, and increased storage, insurance, and financial exchange costs. It has also affected the ability of traders and companies to meet their obligations, pushing some to resort to more costly alternatives, at a time when the effects of the crisis have begun to extend to citizens and goods and services markets. They agree that addressing the crisis requires political and diplomatic action simultaneous with internal technical measures, including pressure on Israel to raise the ceiling for receiving surplus shekels and releasing clearance funds, in addition to accelerating the transition to electronic payment methods, reducing reliance on cash, and finding alternative banking channels, warning that the continuation of the crisis without radical solutions may lead to further economic contraction, the expansion of the unregulated economy, and threatening the stability of various economic sectors. A "recurrent old" crisis. Economic expert Dr. Moayad Afaneh confirms that the shekel accumulation crisis in banks operating in Palestine represents a "recurrent old" crisis, but it has reached more severe levels in recent months, as a result of the restrictions imposed by Israel on receiving the surplus shekel from the Palestinian economy, despite a clear text in the Paris Economic Protocol regulating this process, warning that the crisis will remain a constant source of pressure on the Palestinian economy unless its political and technical roots are addressed. Afaneh explains that the Paris Protocol, signed in 1994, regulates the financial relationship between the Palestinian Authority and Israel, but the size of the Palestinian economy has doubled since then, while Israel still receives only about 18 billion shekels annually through four installments, a figure that is not commensurate with economic growth, as the actual need is estimated to transfer at least 30 billion shekels annually to Israeli banks, which leads to a permanent accumulation of surplus Israeli currency within the Palestinian market. The shekel accumulation crisis doubles. Afaneh points out that the crisis reached a critical level at the end of the second quarter of the year, before the transfer of the quarterly installment of 4.5 billion shekels, noting that the volume of shekels accumulated in Palestinian banks currently amounts to about 18 billion shekels. Afaneh explains that this reality hinders the feeding of Palestinian bank accounts in Israeli banks, which are the accounts used to execute payments for trade between the two sides, and also imposes additional costs on banks, including storage, insurance, and transportation, loss of investment opportunities, and costs of financial swap operations, and weakens the role of the banking sector as a financial intermediary, thus opening the way for the growth of the black market and the informal economy. Afaneh expects that Israeli banks will begin receiving the quarterly installment this month, which will temporarily alleviate the severity of the crisis, but will not end it, expecting the pressures to return after a short period due to the continued existing imbalance. Extended repercussions. Afaneh confirms that the repercussions of the crisis extend to three main levels; banks incur losses resulting from the idle cash mass and the rising costs of managing it, while companies and traders face difficulties in depositing shekels and financing import and trade operations, which pushes them to more costly alternative solutions. As for the citizen, they are affected by their inability to deposit their money or obtain foreign currencies easily, which forces them to resort to exchange offices and bear additional differences in exchange rates, stressing that all these costs are ultimately reflected on the consumer, increasing the burdens under which the Palestinian economy has been suffering for more than 32 months. Two paths to address the crisis. Afaneh believes that addressing the crisis requires two parallel paths; the first is political, through Palestinian and international action to pressure Israel to receive the surplus shekel, through sister and friendly countries and international financial institutions, foremost among them the World Bank and the International Monetary Fund. The second path, according to Afaneh, is technical, and consists of activating the law to reduce cash transactions, accelerating digital transformation, and providing incentives and the necessary infrastructure to promote electronic payments, in addition to finding regional or international channels to dispose of the surplus shekel through banks that have banking relationships with Israel. Protests and delivering a message to official bodies. Yassin Dweikat, the rapporteur of the Tax Committee in the Federation of Chambers of Commerce, Industry, and Agriculture, and a member of the Board of Directors of the Nablus Chamber of Commerce and Industry and its official spokesperson, confirms that the shekel accumulation crisis and its resulting tightening of bank procedures regarding currency deposits and issuing checkbooks have caused widespread damage to the private sector and the Palestinian economy, explaining that the protests carried out by the Chambers of Commerce and Industry came to send an urgent message to official bodies and the banking sector about the necessity of intervention to alleviate the effects of the crisis before entering a more dangerous and unbearable stage. Dweikat explains that the crisis is not new, but has been discussed for about a year, but its repercussions have escalated unprecedentedly, which prompted the Federation of Chambers of Commerce to call for protest vigils in front of the chambers' headquarters in various governorates, after the crisis affected various components of the private sector, and directly impacted the economic cycle, the volume of commercial deals, and trade between traders. The crisis of rationing checkbook issuance. Dweikat points out that the rationing of checkbook issuance and the banks' refusal to accept shekel deposits prevented traders from being able to pay their financial obligations, whether related to the price of goods or other commercial obligations, which led to a clear decline in the volume of commercial transactions. Dweikat notes that the repercussions of the crisis were not limited to traders, but extended to employees, workers, and citizens, explaining that the Palestinian economy historically relies on checks as the main payment method, especially in purchasing expensive goods such as cars, furniture, electrical appliances, and residential apartments, where the sales system in these sectors is based on an initial cash payment followed by payment through post-dated checks. He confirms that reducing the issuance of checkbooks deprived a wide segment of citizens of purchasing in installments, and also deprived traders of one of the most important competitive tools in the market, because deferred sales supported by checks are the safest means for the seller and the most encouraging for sales. Dweikat explains that the crisis also reflected on public finances, as a large number of taxpayers became unable to pay their due taxes in the usual way through checks, which led to a decline in tax revenues and increased pressure on the Palestinian Authority's budget. Dweikat stresses that the Federation of Chambers of Commerce and Industry demanded the government, the Palestinian Monetary Authority, the Association of Banks, and bank managements to take practical steps to alleviate the effects of the crisis, foremost among them continuing to accept shekel deposits and facilitating the issuance of checkbooks, considering that banks are required to bear part of the responsibility alongside the private sector, although the main reason for the crisis is the Israeli side's refusal to receive the surplus shekel. The importance of international action to pressure Israel. Dweikat confirms that a radical solution requires international action to pressure Israel to resume receiving the surplus shekel and release clearance funds, considering that the continued detention of clearance funds and the refusal to receive Israeli currency have contributed to deepening the recession and economic contraction. Dweikat warns that the Palestinian economy has already entered a real crisis stage, reflected in a decrease in commercial deals, a decline in the ability of wholesale and retail traders to complete sales operations, in addition to increasing difficulties in obtaining dollars to finance imports, which pushes some traders to resort to the black market. Dweikat stresses that the continuation of the current situation without quick solutions may lead to a more dangerous stage whose repercussions the private sector, the Palestinian Authority, and Palestinian society will find difficult to bear. Exhausting several attempts to address the problem. Khaled Sarahneh, Secretary of the Union of Gas Station Owners, confirms that the shekel accumulation crisis has become one of the most serious challenges facing the Palestinian economy, pointing out that it is not a new crisis, but has been ongoing for about a year, while the recent protests came after exhausting many attempts to address the problem through dialogue with the Palestinian Monetary Authority and relevant parties, with the aim of shedding light on the crisis and contributing to finding solutions for it, and not to direct accusations at any party. Sarahneh explains that the Israeli occupation bears the primary responsibility for the exacerbation of the crisis, as it is the party that imposes restrictions on the transfer of surplus shekels, stressing that the Palestinian Monetary Authority has made efforts and held continuous meetings to try to find solutions, but its powers are limited in the face of these restrictions, which has made all parties go in a vicious circle; banks face a problem with the Palestinian Monetary Authority, and the Palestinian Monetary Authority faces the problem with the Israeli side, while commercial sectors directly bear the consequences. Protests are not internal. Sarahneh points out that the protest vigils organized by the Chambers of Commerce were not directed against the government or Palestinian institutions, but rather aimed to mobilize all partners to participate in addressing the crisis, stressing that the government, the Palestinian Monetary Authority, the Petroleum Authority, banks, and the private sector are "partners in the homeland, concern, and solution," and that cooperation is required to solve the problem, not to exchange accusations. Sarahneh stresses that the General Petroleum Authority has been and continues to make continuous efforts in cooperation with gas stations to find solutions to problems related to banks, and participated in many meetings with the Palestinian Monetary Authority and the Association of Banks, and also initiated granting an additional incentive (bonus) on electronic payment card sales, stressing that all parties are partners in the problem, just as they are partners in finding solutions. Direct impact on gas station operations. Sarahneh explains that the crisis has directly impacted gas station operations, as the banks' refusal to accept shekel deposits practically means that station owners are unable to pay for fuel, which threatens the continuity of their activity. Sarahneh explains that the condition of depositing in dinars or dollars forces station owners to buy foreign currencies from the market, which raises costs and incurs additional losses, stressing that banks are not adversaries, but partners facing a real crisis. He believes that banks transferring the burdens of their crisis to station owners and small traders increases the complexity of the economic scene, pointing out that banks have broader capabilities and banking relationships that help them manage their crises, while the station owner relies entirely on their daily commercial activity, which makes any disruption in banking operations a direct threat to the continuity of their activity. The crisis extends to various economic sectors. Sarahneh points out that the crisis is not limited to the fuel sector, but extends to various economic sectors, amid the financial distress suffered by the government, and the difficulties faced by the Petroleum Authority in its dealings with Israeli companies, stressing that all institutions are making efforts to address the crisis, but they need broader support and more effective measures. Threat to basic goods. Sarahneh calls for broad governmental and diplomatic action, including communication with the United States, the European Union, Arab countries, and the international community to pressure for addressing the crisis, warning that its continuation may threaten the ability of Palestinians to provide basic goods, including food, medicine, and fuel. Sarahneh expresses hope for political endeavors that may lead to solutions that are still undeclared, but he warns that if the crisis continues without a breakthrough, many traders may be unable to continue their businesses. Sarahneh points out that some institutions and commercial establishments have already closed and handed over their keys to the Chambers of Commerce, after accumulated losses exceeded their ability to continue. Systematic Israeli policy. Economic expert and analyst Dr. Thabet Abu Al-Rous believes that the shekel accumulation crisis in the Palestinian market does not represent a banking or technical crisis related to the Paris Economic Agreement, but rather reflects a systematic Israeli policy aimed at stifling the Palestinian economy and weakening its basic components. Abu Al-Rous warns that the continuation of the crisis will push economic conditions towards further deterioration, pointing to the development of the crisis with protests by gas stations and commercial chambers in the West Bank. According to Abu Al-Rous, Israel has announced more than once that it is waging an economic war against the Palestinian economy, considering that the shekel accumulation crisis comes in this context, especially since it affects the private sector, which constitutes the "last safety valve" for the Palestinian economy. Abu Al-Rous explains that the Palestinian economy still largely depends on the Israeli side, as the monthly trade exchange with it ranges between 57 and 63%, in addition to relying on Israel for electricity, gas, and fuel, as well as the passage of Palestinian imports through Israeli ports. Different procedures. Abu Al-Rous points out that what is happening now differs from what was in place before October 7, 2023, as the Paris Agreement allowed the transfer of about 18 billion shekels to the Israeli side, with the possibility of increasing this ceiling, while Israel is currently refraining from receiving even the agreed-upon amount, which confirms, in his opinion, that the motives are political and not economic. Abu Al-Rous warns that the continuation of the crisis will have wide repercussions, explaining that Palestinian banks are now refusing to receive more shekels, at a time when insurance documents no longer cover the accumulated cash liquidity, pointing out that the absorption capacity of the banking system ranges between six and seven billion shekels, while the current cash mass is about 17 billion shekels. Abu Al-Rous explains that traders are now facing difficulties in transferring the prices of goods to Israeli suppliers, which threatens supply chains and slows down economic growth, with effects that may extend for years. Abu Al-Rous confirms that the repercussions of the crisis extend from Palestinian Authority institutions to citizens, explaining that the cessation of Israeli banks' dealings with the Authority, according to Israeli statements in September next year, may threaten the transfer of clearance funds, and will also raise the cost of imports and hinder commercial and industrial sectors from obtaining production inputs, while the banks' weakened ability to meet market needs will negatively affect the banking sector and its profitability, and directly affect citizens. Abu Al-Rous calls for urgent Palestinian action at the political and diplomatic levels to raise the issue before international forums, in addition to gradually working to reduce reliance on the shekel by expanding the use of the Jordanian dinar and the dollar, and promoting electronic payment methods, digital wallets, and payment cards, in addition to finding temporary arrangements for financial exchanges between traders, which will alleviate the severity of the crisis until more sustainable solutions are found. An attempt to strike the Palestinian economy. Journalist specializing in economic affairs, Ayham Abu Ghosh, says: "The crisis of shekel accumulation in the vaults of banks operating in Palestine is ongoing and escalating, and the Israeli occupation is responsible for it, as it uses this issue as one of the various tools to strike the Palestinian economy alongside other tools such as threatening to cut banking relations, detaining clearance funds, or preventing workers from working inside the Green Line. Therefore, this problem pressures the Palestinian economy, whether commercial or economic sectors or even individuals, in addition to greatly pressuring banks operating in Palestine. All Palestinians are paying the price for this escalating crisis." Abu Ghosh confirms that the continuation of this problem will have serious repercussions on the Palestinian economy, as the funds accumulated in bank vaults in shekels become outside the banking system, meaning they cannot be invested, lent, or used to pay Israeli suppliers. Therefore, we find that banks tend to limit the ceiling of shekel deposits not out of desire, but because reality imposes it on them. Of course, the various economic and commercial sectors are right in their protests against the current situation, as interests are harmed, financial settlements are delayed, and the economic wheel is moving backward. According to Abu Ghosh, there is no way out of this crisis except by pressuring the Israeli side to solve the economic problems that reflect serious political dimensions, including this problem, by raising the ceiling of funds received by the Bank of Israel from approximately (18) billion shekels annually to approximately (30) billion shekels annually, in addition to Palestinian efforts to accelerate the implementation of the recently approved law to limit the use of (cash), in addition to strengthening financial oversight operations and combating money laundering. It is also possible to think outside the box, as official bodies have suggested, by having a third country with commercial relations with Israel absorb the surplus shekel currency, in exchange for transferring hard currency to the Palestinian side. Abu Ghosh points out that the crisis is related to the relationship with the Israeli side, and therefore any protests directed at the Palestinian banking sector are misplaced. Instead, efforts should be combined to pressure the Israeli side to absorb the surplus currency, as it is the issuing entity. A structural economic crisis. Economic researcher Ikhlas Tamliyeh confirms that the shekel accumulation crisis in banks operating in Palestine is no longer merely a banking problem, but has turned into a structural economic crisis that reflects the restrictions imposed on the Palestinian economy, especially Israeli restrictions on the financial and monetary sectors. Tamliyeh explains that the essence of the crisis lies in the continued restrictions imposed on the ceilings for shipping surplus shekels from Palestinian banks to the Israeli banks they contract with, which has led to the accumulation of large quantities of currency within the Palestinian banking system beyond its daily operational needs. A state of financial suffocation. Tamliyeh points out that this accumulation has created a state of financial suffocation, and has turned the surplus shekel into a real burden on banks, due to the difficulty of investing it or recycling it normally. At the same time, banks incur increasing financial losses due to the freezing of this liquidity, as well as the associated insurance and storage costs. Tamliyeh explains that the crisis has gone beyond the banking sector, after Palestinian banks exhausted their ability to carry out foreign currency exchange operations known as (Swap), which limited their ability to finance commercial operations and ensure the import of basic goods, which directly affects economic activity and the lives of citizens, especially with regard to providing food, fuel, and basic goods. Restricting local market movement. Tamliyeh notes that the seriousness of the crisis is exacerbated by the continued increase in the volume of accumulated shekels, which, according to the latest announcement, reached about 17 billion shekels, considering that this reality imposes great pressure on banks, traders, depositors, and importers, and leads to restricting the movement of the local market, and fuels the state of protest and pressure witnessed by the Palestinian economy. Tamliyeh warns that the continuation of the crisis without radical solutions will lead to greater tension in the markets, a decline in confidence in the banking system, and an increased reliance on cash transactions outside the official framework, thus expanding the unregulated economy and weakening the banking system's ability to perform its essential role in financing local economic activity. Political and economic roots of the crisis. Tamliyeh believes that addressing the crisis requires multi-level solutions, because its roots are political and economic, not just banking, calling for intensive diplomatic and political action involving the parties guaranteeing the Paris Economic Agreement and Protocol, with the aim of ensuring compliance with financial agreements, and allowing an increase in the ceilings for shipping surplus shekels regularly and without restrictions, with a guaranteeing party to implement these obligations. Necessary measures. Tamliyeh calls for unifying efforts between the Palestinian Monetary Authority, the government, and the private sector through a unified coordinating council to manage liquidity and the crisis more efficiently, ensuring the continued provision of banking services to traders and citizens without imposing additional burdens on them. Tamliyeh emphasizes the importance of expanding the use of electronic payment systems, and approving incentive policies that reduce reliance on paper cash, in addition to adopting a long-term strategic economic vision aimed at reducing the structural dependence of the Palestinian economy on the Israeli economy, and enhancing its independence and diversifying import channels outside the structure of Israeli crossings.