A Hostage Economy: Clearing Houses Between Israeli Control and the Lack of Palestinian Financial Sovereignty

In the absence of Palestinian control over borders and crossings, financial sovereignty becomes a mere illusion, and economic decision-making is dependent on the will of the occupation. One of the most prominent manifestations of this reality is the "clearance system," through which most of the Palestinian Authority's public revenues are collected via Israel. This system has transformed from a temporary administrative tool under the 1994 Paris Economic Agreement into a permanent constraint used for political pressure and financial starvation.

Clearance revenues constitute approximately 60 to 70% of the Palestinian Authority's general income. In fact, the Palestinian Ministry of Finance relies almost entirely on these revenues to fund salaries and basic services. However, these revenues remain entirely subject to Israeli control, in terms of timing and quantity, and even the authority to deduct them under various pretexts.

In 2024, the total announced clearance revenue amounted to approximately NIS 9.9 billion, while the Ministry of Finance projected it would reach NIS 10.2 billion in 2025. This is a slight increase that does not reflect actual growth but rather represents unproductive financial inflation. More alarming, however, is that Israel deducted approximately NIS 3 billion of these funds during 2024, equivalent to 38% of the total transferred revenues. This created an immediate financial deficit and forced the PA to cut salaries and services.

During the first half of 2025, deductions continued at a monthly rate of between 300 and 320 million shekels. In total, approximately 7 billion shekels were withheld or deducted from clearance revenues from 2019 to mid-2025, according to independent Palestinian economic reports. This reality left the PA with no choice but to conduct emergency monthly financial management, without a planning horizon or stability in salary payments or program funding.

Israel cites deductions from prisoners' and martyrs' salaries, as well as electricity, water, and utility bills, without any joint mechanism for verification or appeal. This effectively means that any Palestinian social or economic activity can become grounds for withholding funds, making the clearance revenue system a tool of collective punishment, not merely a temporary financial arrangement.

Most dangerously, this model is unlike any other globally recognized clearing model. While countries like the European Union and the Gulf States rely on clearing systems based on mutual sovereignty and transparency, the Palestinian situation is governed by one party, which occupies the land, controls the flow of money, and uses it as a means of political and economic pressure.

The consequences of this imbalanced equation are directly reflected on the Palestinian street: delayed salary payments, mounting personal debts for employees, a collapse in public confidence in the effectiveness of government work, and increased social and economic tensions. The private sector is also suffering from fluctuating liquidity and postponing investments due to the general lack of financial stability.

In the face of these realities, realistic alternatives must be sought, beginning with expanding the domestic tax base, activating fair local collection, and adopting an import substitution policy to support local production and reduce reliance on the Israeli market. A transparent oversight mechanism for clearance revenues must also be developed through international intermediaries or financial partners.

In addition, inspiration can be drawn from the experiences of countries that have suffered from the control of their financial resources by external parties, such as South Sudan after its secession or Kosovo in the post-war period. In these cases, partnerships with international financial institutions, the adoption of national currencies, and the establishment of independent central banks contributed to reducing dependency and enhancing financial independence. Despite the differences, the approach is adaptable to Palestine within a gradual vision.

Most importantly, a national emergency fund for sustainable financing should be established, enabling the government to cover minimum salaries and services in the event of a disruption to the clearing transfer. This fund may require support from international and Arab partners, but it represents a sovereign step toward reducing dependency.

The clearance crisis not only reflects an imbalance in the relationship with the occupation, but also exposes the fragility of Palestinian financial policies and their reliance on uncertain instruments. Therefore, any discussion of sovereignty is incomplete without addressing this deferred issue, not through rhetorical statements, but through proactive policies and institutions capable of implementing them.

Sovereignty is not granted, but constructed, and its first provision is the right to manage national funds without permission from the opponent or conditions from the occupier.