JERUSALEM, Jan 12 – Israel will use Palestinian Authority (PA) tax revenue to settle a 1.9 billion shekel ($544 million) debt to the Israel Electric Company (IEC). Finance Minister Bezalel Smotrich announced this during Sunday’s cabinet meeting.
Israel collects taxes on goods entering the West Bank for the PA under a longstanding agreement. Smotrich withheld 800 million shekels meant for Gaza administration after the October 7 Hamas-led attack on Israel. Norway froze these funds, but Israel will now redirect them to pay the IEC debt.
Smotrich justified this decision by citing “anti-Israeli actions” like Norway’s recognition of a Palestinian state. He claimed the PA’s debt increased loans and interest rates, harming IEC’s credit and Israeli citizens.
The Palestinian Finance Ministry stated Norway agreed to release some frozen funds. Out of 1.5 billion shekels held since January, 767 million will cover fuel purchases. An equal amount will settle electricity debts owed by Palestinian distribution companies to the IEC.
Smotrich opposes funding the PA, accusing it of indirectly supporting Hamas after the October 7 attack. The PA currently pays only 50-60% of public sector wages, facing severe financial strain.
Israel deducts amounts matching “martyr payments” the PA provides to families of militants and civilians killed by Israel. The Palestinian Finance Ministry revealed Israel withheld 2.1 billion shekels, raising total frozen funds to 3.6 billion by 2024.
In October 2023, Israel started deducting 275 million shekels monthly from tax revenues, equal to Gaza’s monthly budget allocations. This crisis forced the PA to send funds directly to public servants in Gaza.
The Palestinian Finance Ministry is working with international partners to release the remaining frozen funds. However, the economic crisis continues to impact the PA’s ability to meet obligations.
