'It will be us who will pay the price': Palestinians react to Israel's financial sanctions on the PA

Recent Israeli sanctions against the Palestinian Authority(PA) have provoked mixed reactions among Palestinians. The sanctions were announced by the Israeli government last Friday, following the PA's request for an advisory opinion from the International Court of Justice in The Hague on Israel's occupation of the West Bank.

Sanctions include Israel's withholding of around US$40 million of custom money on imports that Israel collects on behalf of the PA through its control of border crossings. The amount would be given to Israelis who suffered damages or lost relatives because of Palestinian attacks.

They also include the deduction from customs money of some US$171 million, equivalent to the PA's monthly social aid to families of Palestinians killed by Israeli forces and families of Palestinian prisoners in Israeli jails.

Last week, more than 90 countries urged Israel to lift its sanctions on the PA.

Israeli sanctions will lead to PA's collapse, Palestinian PM tells Haaretz https://t.co/v3MzXWWJMZ

— Haaretz.com (@haaretzcom) January 9, 2023

Moreover, Palestinian Prime Minister Mohammad Shtayyeh told the Israeli daily Haaretz that Israeli sanctions will "promptly lead to the PA's collapse".

Shtayyeh said that Israeli sanctions "are another nail in the Palestinian Authority's coffin unless there is immediate intervention by the international community, namely the administration in Washington and Arab countries".

This alarmist statement by Shtayyeh was met with scepticism by Palestinian observers and in the street.

"The PA's claims that it will collapse are like an exhausted alarm bell," Palestinian economist and researcher Zayn Abudaka told The New Arab. "The PA has constantly been in financial crisis, and it has gone through tougher times, without collapsing." 

"Some 75% of the PA’s income does come from taxes, but custom money represents 55% of all the PA's tax collection, which is high, but not enough to make it collapse if it is seriously affected," he explained.

"The PA's tax collection depends on taxing imports, which will always leave the PA exposed to Israeli control over its income," he remarked Abudaka. "This is the easy way to raise income, rather than developing production and taxing income."

The Kingdom of Belgium voiced worry on Tuesday over the Israeli occupation's determination to impose punitive sanctions on the Palestinian Authority in response to the ICJ's request for an advisory opinion. pic.twitter.com/DQ3aJlfW7o

— Palestinian hopes (@palestinehopes) January 17, 2023

The PA's current financial crisis is also due to a "lack of transparency", according to Ubai Aboudi, director of the Bisan Centre for Research and Development, a socio-economic Palestinian think tank based in Ramallah.

"There is very little public data on the PA's expenditures, as there are no sufficient regular published reports on the use of the public budget," Aboudi told TNA.

"This lack of transparency is also present within the PA's different institutions," he said. "How else to explain that while many public employees receive uncomplete salaries, due to the crisis, the PA just paid a series of rewards to high-ranking officials last month?" 

"The PA continues to depend on a consumption-based taxation system to maintain its bureaucracy, rather than investing in building a productive economy," remarked Aboudi.

"This tendency puts the largest part of the tax load on daily-life goods, making Palestinians with less income most vulnerable to the financial crisis," he added.

Intl law requires an occupying power to use taxes levied on the occupied population for their benefit or for security. Transferring Palestinian tax money to Israeli citizens-even those who suffered loss of loved ones-is a particularly cynical kind of theft https://t.co/Ja7nzaqH4H

— Sari Bashi (@saribashi) January 15, 2023

In a popular cafe in Ramallah's city centre, TNA spoke with young Palestinians who shared Aboudi's analysis.

"I don't believe that the PA will collapse, because it has been through a tougher crisis in the past and has managed to pull it off with the help of European and American financial aid, and with raising taxes on us, regular citizens," Hiba Saida, a 27-year-old education worker said.

"The crisis will be felt mostly by regular citizens, especially those with limited income, as prices will rise," she said.

"In fact, this has been the case, constantly, for several years now," she added.

"In my opinion, European and American governments will not allow the PA to collapse and will come to its aid financially if necessary, as it happened just last year," remarked Anas Hosheh, a 30-year-old PA-employed media and communications worker.

"In the meanwhile, the PA will most probably rise taxes on everything, and prices will go up, again, and we, the people, will end up sustaining the PA's finances, we will pay the price," he said.

"The PA taxes every litre of gas, every pack of cigarettes, every food item, and it receives hundreds of millions in foreign aid every year, so I don't think that it will collapse," said Nader Abdallah, an NGO worker.

"If the PA didn't have an inflated bureaucracy and was more transparent, it wouldn't be running into a crisis and asking for help at every corner," he noted.

Israel has repeatedly withheld Palestinian custom money for political pressure on the PA. In November, a PA financial adviser told Palestinian media that the PA needed some US$400 million to avoid an imminent financial collapse.

Earlier in the same week, the European Union had announced a 15.5 million-euro aid package to the PA.

The EU aid money to the PA had stopped flowing for months, due to European concerns over the Palestinian schools' textbooks content, according to the EU.

In June, the EU released some US$220 million in direct aid to the PA, after the president of the European Commission, Ursula Von Der Leyen met PA officials in Ramallah.