2026 will be ‘toughest financially’ due to Israel’s withholding of tax revenues: Palestine

By Aysar Alais

RAMALLAH, Palestine (AA) - Palestinian Finance Minister Istifan Salameh warned Thursday that the Palestinian Authority is facing an “existential threat” due to Israel’s continued withholding of tax revenues, stressing that 2026 will be its most difficult financial year.

Speaking at a press conference in Ramallah, Salameh said Israel has seized around 70% of Palestinian revenues, exacerbating the fiscal deficit and undermining the government’s ability to meet its obligations, foremost among them paying salaries and providing basic services.

He said 2026 would be the most financially challenging year in the history of the Palestinian Authority, warning that the Israeli policies toward Palestinians amount to “playing with fire.”

Salameh warned of the repercussions of these measures on financial and banking stability, as well as on the broader economic situation in the Palestinian territories.

Far-right Israeli Finance Minister Bezalel Smotrich has repeatedly threatened to sever vital financial channels and halt relations between Palestinian and Israeli banks, a move that could isolate the Palestinian economy internationally and disrupt trade flows, amid warnings of a potential collapse of the banking system in the occupied West Bank.

Salameh said the Palestinian Authority is facing an “existential threat” as Israeli deductions from clearance revenues continue and financial pressures intensify, accusing Israel of seeking to weaken the Authority and undermine its ability to continue functioning.

For months, the Palestinian government has not received any clearance funds, the finance minister said, describing the current situation as “dangerous.”

The Palestinian Authority has been grappling with a financial crisis since 2019, which intensified in 2025, with accumulated deficits and unpaid dues reaching $4.26 billion, according to Palestinian data.

Since 2019, Israel has been deducting amounts from Palestinian clearance revenues under various pretexts and stopped transferring them entirely nine months ago, plunging the Authority into a prolonged financial crisis that has left it unable to fully pay public sector salaries.

Clearance revenues are taxes on goods imported into the Palestinian territories that Israel collects on behalf of the Authority. Israel has used them as a political pressure tool through deductions and withholding.

-Foreign aid

Salameh pointed to a relative improvement in foreign assistance over the past year, noting that Palestine received $800 million in direct budget support, in addition to about $850 million from donors.

“Despite this improvement in external support, the scale of financial challenges remains significant amid the ongoing Israeli measures,” he added.

The minister announced that the government will pay 60% of public employees’ salaries next Monday, given the unprecedented financial crisis facing the Palestinian Authority.

He called on the international community to pressure Israel to release Palestinian funds withheld by Israel.

After the war on Gaza began in October 2023, Israel started transferring only about 30% of clearance revenues after deducting amounts allocated by the Palestinian government for salaries and social affairs in Gaza.

Israeli government ministers, led by Prime Minister Benjamin Netanyahu, have repeatedly incited against the Palestinian Authority.

On Sunday, the Israeli government approved decisions aimed at altering the legal and civil reality in the occupied West Bank to strengthen Israeli control over the territory.

Writing by Mohammad Sio in Istanbul