The question today is no longer: How does the Palestinian private sector survive the crisis? Rather: How long can it continue to carry the economy on its shoulders?
Over the past two years, the private sector has not merely been a recipient of the economic crisis's repercussions; it has been the pillar that maintained the continuity of economic activity, preserved thousands of establishments, and sustained tens of thousands of jobs despite the sharp contraction and decline in economic activity. However, this sector's resilience is no longer limitless, and signs of exhaustion have become evident in the markets, in investor behavior, and in the decisions of companies that are now leaning towards caution rather than expansion.
The private sector represents the backbone of the Palestinian economy; it employs more than 80% of the workforce and leads the majority of productive, commercial, and service activities. Data from the Palestine Monetary Authority indicates that private sector deposits account for about 93.3% of the total deposits in the banking system, which reflects the close link between the stability of the banking system and the sustainability of private sector activity.
But what this sector faces today is not a single crisis, but a series of intertwined crises. While approximately 17 billion shekels are accumulating within the banking system due to Israeli restrictions on shipping surplus cash, markets are suffering from a lack of operational liquidity necessary for the continuation of commercial activity.
The problem is no longer merely banking; it has become a daily dilemma for traders, industrialists, and investors. The difficulty of depositing cash has forced many companies to keep large sums within their establishments, which entails increased costs for protection, insurance, and money transfer, the disruption of part of the working capital, and delays in settling obligations to suppliers.
The crisis has extended to payment instruments themselves. Commercial checks, which represent one of the most important means of settlement between companies, have become more difficult for a number of traders due to some banks tightening procedures for issuing checkbooks or controls on their use amid the shekel accumulation crisis. Thus, trade slowed down, trust among dealers weakened, and reliance on cash increased at a time when the banking system suffers from an un-employable cash surplus.
Here lies the real paradox; the problem is no longer a lack of funds, but rather the disruption of money movement within the economy. The accumulation of shekels limits deposits, the difficulty of depositing disrupts companies' liquidity management, the disruption of payment instruments slows down trade, and the high cost of financing limits investment, while weak demand leads to reduced production and employment. When these factors combine, the business environment becomes more costly, riskier, and less capable of growth.
Amidst these circumstances, the announcement came regarding the implementation of financing agreements worth 395 million US dollars through five Palestinian banks, as part of the European Facility valued at 400 million Euros to support micro, small, and medium-sized enterprises. This is an important initiative that deserves appreciation, but it requires distinguishing between two different goals: enhancing the liquidity of the banking system on the one hand, and improving private sector access to finance on the other.
Liquidity reaching banks does not automatically translate into cheaper loans for investors. The cost of financing will remain linked to global benchmark interest rates, risk margins, and operating costs, unless these initiatives are reflected in interest rates, collateral requirements, and lending terms. Therefore, the success of these programs will not be measured by the amount of money injected into banks, but by their ability to enable companies, especially small and medium-sized ones, to access affordable financing that helps them invest and grow.
However, even if financing conditions improve, investors will not expand if they do not find a market that can absorb their production. Local demand has declined due to reduced purchasing power, delayed salaries, and slowed consumer spending, which has led many establishments to operate below their production capacity and postpone expansion plans.
Declining confidence remains the most serious challenge. When investors cannot predict the business environment, traders hesitate to expand their activities, and industrialists postpone their investments, the economic cycle enters a contractionary loop that is difficult to break.
It cannot be overlooked that the banking system itself bears part of the burden of this crisis. It holds significant un-employable cash liquidity, while the banking system's deposits exceed 19 billion dollars and the credit facilities portfolio amounts to about 12 billion dollars, which confirms that the problem is not a shortage of financial resources, but rather the disruption of their ability to reach the real economy.
Protecting the private sector is no longer a demand of an economic group, but a national necessity. Every establishment that ceases to operate means fewer jobs, less investment, less tax revenue, and weaker economic growth.
What is required today is an integrated economic vision that begins with addressing the shekel accumulation crisis, ensuring the smooth flow of cash, developing loan guarantee programs, reducing the cost of financing, accelerating the transition to digital payments, stimulating local demand, supporting productive investment and exports, and rebuilding confidence in the business environment.
The Palestinian private sector is not asking for subsidies or exceptional privileges, but rather demands the removal of obstacles that prevent it from playing its natural role in investment, production, and employment.
The question that should occupy decision-makers today remains:
If the private sector loses its ability to lead the economy, who will lead the recovery phase?
Protecting the private sector is no longer an issue for businessmen alone; it has become an issue that affects every Palestinian family. Every establishment that continues to operate means a job preserved, income generated, and investment remaining within the homeland. As for exhausting the private sector, its price will not be paid by the investor alone, but by the worker, the consumer, the public treasury, and the entire Palestinian economy.
Economies do not recover by increased spending alone, but when their private sector regains its confidence and ability to invest and produce.
شارك برأيك
Is the Private Sector Losing Patience?