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Why did the World Bank warn in 2024 that the Palestinian Authority was at risk of collapse?
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Palestinian Authority
U.S. Pres. Bill Clinton (center) looking on as Israeli Prime Minister Yitzhak Rabin (left) shakes hands with Palestinian leader Yasser Arafat after the signing of the Declaration of Principles on Palestinian Self-Rule, September 1993.
In May 2024, the World Bank warned that the Palestinian Authority (PA) was on the verge of collapse due to a severe and compounding financial crisis exacerbated by the Israel-Hamas War.1
The primary drivers of this fiscal instability included:
- Tax Revenue Deductions: Israelās finance minister, Bezalel Smotrich, significantly increased the deductions taken from the tax revenues that Israel collects on behalf of the PA.1
- Loss of Labor Income: The economy faced immense strain following the loss of income for approximately 150,000 West Bank Palestinians who had worked in Israel prior to October 7, 2023, most of whom were barred from returning to their jobs during the conflict.1
- Ongoing Instability: These factors intensified the PA's existing financial hardships, which had been building for years due to fluctuating international aid and previous Israeli withholdings of tax revenue.1
This financial pressure left the PA struggling to maintain its functions while Israel continued military operations and raids within the West Bank.1