One Economy on Paper… Two Economies on the Ground

The question today is no longer whether the Palestinian economy is in crisis, but rather which Palestinian economy are we referring to? The economy of the West Bank, which is still operating at its minimum, or the economy of Gaza, which, due to war and destruction, has transformed into a paralyzed economy outside the normal financial timeline. Between these two paths, one of the most dangerous structural problems is revealed: a presumed economic unity on paper, but effectively divided at the level of money, liquidity, and the banking system.
Theoretically, the West Bank and Gaza Strip are subject to the same economic framework, in terms of the absence of monetary sovereignty, reliance on the shekel, the dominance of the clearing system, and Israeli restrictions on the movement of funds. However, reality reveals that the impact of these restrictions is not equal. While the West Bank still possesses a minimum financial operational capacity, Gaza is currently experiencing a near-complete collapse of its organized monetary cycle, making talk of a “unified Palestinian economy” closer to an administrative description than an existing economic reality.
This collapse in Gaza is not only due to the enormous physical destruction but also to the paralysis of the financial infrastructure itself. With the destruction of bank branches, power and communication outages, and the inability to access bank accounts, the financial system has exited the equation, replaced by a forced cash economy, based on limited, worn-out, and unregulated cash. In this context, cash is no longer a natural medium of exchange but has become a tool of economic strangulation.
Here, the liquidity crisis appears as a symptom of a deeper problem. The shortage of cash is not just a matter of banknotes but a direct result of the absence of pumping channels, the cessation of banks' normal role, and the impossibility of introducing sufficient quantities of currency. Over time, transactions have been disrupted, the cost of buying and selling has increased, and the informal economy has expanded, while prices have lost any logical reference to people's ability to pay.
In contrast, despite all political and economic challenges, the West Bank still relatively benefits from the existence of a functioning banking system and a wider spread of electronic payment tools and bank transfers, which allows economic activity to continue within manageable and controllable limits. This monetary and financial gap between the two regions does not reflect a difference in economic culture or financial behavior but a forced disparity in the ability to access the same financial system.
This gap becomes strikingly clear when looking at the distribution of bank deposits. Banking estimates indicate that the total deposits of banks operating in Palestine today are close to $21 billion, calculated in various currencies, with the West Bank accounting for the overwhelming majority. In the Gaza Strip, although nominal deposits increased during the war to exceed $4 billion, the greater part of them remained stagnant and trapped deposits, unable to transform into actual liquidity in the market. For comparison, the volume of operational deposits circulating in Gaza before the war was in the range of only $1.5 to $2 billion. This paradox clearly reveals that the problem in Gaza is not a lack of money itself, but the absence of the ability to use it economically.
The picture becomes more complex when considering the issue of bank accounts and financial inclusion. While the percentage of bank account ownership and actual use is higher in the West Bank, thousands of accounts in Gaza have been forcibly disabled. This is not due to a lack of financial awareness, but rather to the collapse of the banking operational environment itself, which has transformed the bank account from an economic empowerment tool into a rigid, functionless number.
Despite the bleakness of the scene, this gap holds an opportunity. The existence of an existing, albeit disabled, banking account base can serve as an entry point for rebuilding the financial cycle, if the banking system is reactivated within an exceptional approach that is consistent with the post-destruction reality and treats Gaza as an economy in an emergency state, not a traditional market.
From here, the role of banks in Gaza becomes central, not only as a financial intermediary but as a tool for economic recovery. Reconstruction cannot begin in an economy that operates only with cash, nor can aid continue to flow outside organized channels without becoming an additional burden. What is needed is a different, more flexible banking role, based on reactivating accounts and linking them to simplified digital payment tools capable of operating in low-connectivity environments, and in parallel with managing aid and transfers within a banking framework that ensures transparency and limits monetary chaos.
Palestinian banks possess the technical expertise and institutional accumulation that qualify them to play this role, but they need clear regulatory cover and international partnerships that reduce risks and allow them to operate outside the traditional credit-based model. Recovery in Gaza will not begin with large loans, but with small, phased financing targeting food chains, essential services, and micro-enterprises that restart the economic engine from the bottom up.
However, any real recovery will remain incomplete if the financial separation between Gaza and the West Bank continues. What is needed is not only the reconstruction of Gaza but its financial reintegration into the Palestinian economy as a whole, through unified operational policies, common payment platforms, and organized liquidity flows. The continuation of this separation will turn Gaza into a permanent relief economy and, in turn, increase pressure on the West Bank, which will find itself forced to absorb imbalances beyond its capacity.
In conclusion, the crisis of Gaza's economy is not just a crisis of destruction, but a crisis of absent financial integration. And the cash crisis is not fate, but the result of the absence of an urgent and comprehensive financial vision. Empowering banks, developing alternative payment tools, and linking Gaza to the West Bank through a unified financial path is not a technical option, but a fundamental condition for any real and sustainable economic recovery.
 * International Economic Advisor, Board Member of International Digital Transformation