Western officials warned of an "economic catastrophe" that would hit the West Bank unless Israel renews a vital exemption that Israeli banks need to maintain their relations with their Palestinian counterparts.

The British newspaper, the Financial Times, said in a report published today, Wednesday, that the exemption, which expires at the beginning of next July, allows for the payment of the costs of vital services and salaries associated with the Palestinian Authority, and facilitates the supply of basic materials, such as food, water, and electricity, to the Palestinian territories.

Three Western officials reported that without this exemption, Israeli banks would stop dealing with Palestinian financial institutions, which would lead to the halt of the Palestinian economy over time.

An American official said: “The point we are making is that people’s access to food, electricity, and water should not be threatened at a time like this, especially in the West Bank.” The official warned that not renewing the exemption “will harm Palestinian interests and the security and stability of Israel and the region.”

For their part, two Western officials said that Washington is leading efforts to renew the exemption, and is asking allies to put pressure on the government of Prime Minister Benjamin Netanyahu. British officials also indicated that the United Kingdom is also concerned about this issue.

The Palestinian economy uses the Jordanian dinar in some of its trade with other economies, but this economy officially depends on the Israeli shekel, so that the financial transactions of Palestinian institutions must pass through the “Bank of Israel” and other Israeli banks.

About $8 billion in trade between Israel and the West Bank passes through Israeli channels every year, according to American data. This includes $2.3 billion in food payments, $540 million for electricity, and $145 million for water and sanitation services.