Major Israeli banks with business ties to the Palestinian Authority have stopped accepting shekel cash deposits from their Arab counterparts in Judea and Samaria in a move that has the potential to collapse the P.A.’s economy, officials in Ramallah claimed on Wednesday.
Within days, Arab banks in Judea and Samaria will be “unable to finance trade operations between Palestinian and Israeli merchants, as their ability to make financial transfers is directly connected to shipping the accumulated shekel banknotes to their Israeli counterparts,” the P.A.’s Monetary Authority said in a Facebook post on Wednesday morning.
The statement warned of “imminent consequences on all aspects of life” should Israeli financial institutions continue to decline to accept the Israeli shekel banknotes that have accumulated at Palestinian banks.
In accordance with agreements signed in the 1990s between Israel and the Palestine Liberation Organization, the shekel is the primary currency in Judea and Samaria, alongside the Jordanian dinar.
Two months ago, Israeli Finance Minister Bezalel Smotrich extended a waiver shielding Israeli banks with relations to the P.A. from lawsuits stemming from charges of supporting Palestinian terrorism.
The waiver, which the finance minister signed for a period of four months, extends the indemnity to Israeli correspondent banks that transfer money to P.A. fiscal institutions throughout Judea and Samaria.
The decision to extend the indemnity waiver was reportedly made as a tradeoff for Israeli Prime Minister Benjamin Netanyahu’s approval to retroactively legalize several Jewish outposts in Judea and Samaria.
JNS sought comment from Smotrich’s office, as well as the Bank of Israel, on Wednesday evening but did not hear back by press time.
‘Critical for processing transactions’
Earlier this year, Smotrich threatened to topple the P.A.’s economy in response to Ramallah’s push for unilateral statehood and support for the International Criminal Court case against the Israeli leaders.
Ramallah is “working against Israel with political terrorism and promoting unilateral measures around the world,” he said. “If this causes the P.A. to collapse, let it collapse.”
U.S. Treasury Secretary Janet Yellen vowed to use “all diplomatic efforts” to thwart such plans. “I’m particularly concerned by Israel’s threats to take action that would lead to Palestinian banks being cut off from their Israeli correspondent banks,” she stated on May 23.
“These banking channels are critical for processing transactions that enable almost $8 billion a year in imports from Israel, including electricity, water, fuel and food, as well as facilitating almost $2 billion a year in exports on which Palestinian livelihoods depend,” she said.
