Picture this: A gas station customer pulls out a wad of bills to pay for a fill-up. The cashier refuses the money, explaining that the station’s bank has stopped accepting notes and coins as deposits because it already is drowning in cash.
In most places, cash is king. But in the Israeli-occupied West Bank, having too much is gumming up the machinery of daily life. The Palestinian banking system has more Israeli shekels than it can manage. As a result, paper money has gotten harder for residents to spend and for businesses to put into their accounts.
The excess liquidity stems from a conflict between the Bank of Israel and the Palestinian Monetary Authority, which oversees Palestinian banks and financial institutions. Israel limits the amount of physical currency it takes back from the West Bank. Palestinian officials say the cap has not kept pace with growth and is one mechanism used to keep the territory in a state of economic crisis.
Unlike in Gaza, where years of an almost total blockade have caused cash shortages, banks in the West Bank are running out of vault space to store stacks of shekels. With Bank of Israel refusing to accept more notes and coins, commercial banks can’t convert the money into electronic balances to pay suppliers or process transfers on behalf of their customers.
“The banks have been shackled” in their ability to deal with the crisis, Mohammad Manasra, the deputy governor of the Palestinian Monetary Authority, said. “What is being practiced in the West Bank is economic warfare.”
The territory has relied predominantly on the Israeli shekel for decades and depends on Israel to facilitate trade, collect taxes and process payments for imported goods under agreements dating to the 1990s.
Israel’s cash transfer limit from the West Bank’s banking system is 18 billion shekels ($5.9 billion) a year. Banks now accumulate an estimated 30 billion shekels a year, said Moayad Afaneh, an economist who has advised the Palestinian Authority.
Israel has imposed a series of measures that have hobbled the West Bank’s economy since Hamas-led militants attacked in October 2023, starting the war in Gaza.
It revoked most work permits for Palestinians who used to work in Israel, cutting off a major source of income in the occupied territory. It has withheld tax and customs revenue collected on behalf of the Palestinian Authority, which in turn has been unable to fully pay public sector workers — including teachers and hospital staff — for more than a year.
With growing needs for vault space, banks are having to pay to store and insure cash they’re unable to offload. They’re accepting less from businesses and households, which in turn have to find alternative ways to store cash safely.
Stockpiles of money that cash-based businesses can’t deposit because the banks are full has made routine operations and transactions more difficult and expensive, said Hussni Jaber, the executive manager of the Al-Huda Group.
When they can’t pay their suppliers, some gas stations have to stop filling their pumps. The Palestinian Authority in a statement pointed to the issue when gas stations temporarily closed on Saturday.
