RAMALLAH \u2013 Picture this: A gas station customer pulls out a wad of bills to pay for a fill-up. The cashier refuses the money, explaining that the station’s bank has stopped accepting notes and coins as deposits because it already is drowning in cash. <\/p>\n
In most places, cash is king. But in the Israeli-occupied West Bank<\/a>, having too much is gumming up the machinery of daily life. The Palestinian banking system has more Israeli shekels than it can manage. As a result, paper money has gotten harder for residents to spend and for businesses to put into their accounts. <\/p>\n The excess liquidity stems from a conflict between the Bank of Israel and the Palestinian Monetary Authority, which oversees Palestinian banks and financial institutions. Israel limits the amount of physical currency it takes back from the West Bank. Palestinian officials say the cap has not kept pace with growth and is one mechanism used to keep the territory in a state of economic crisis.<\/a><\/p>\n Unlike in Gaza,<\/a> where years of an almost total blockade have caused cash shortages, banks in the West Bank are running out of vault space to store stacks of shekels. With Bank of Israel refusing to accept more notes and coins, commercial banks can\u2019t convert the money into electronic balances to pay suppliers or process transfers on behalf of their customers. <\/p>\n \u201cThe banks have been shackled\u201d in their ability to deal with the crisis, Mohammad Manasra, the deputy governor of the Palestinian Monetary Authority, said in an interview with The Associated Press. \u201cWhat is being practiced in the West Bank is economic warfare.\u201d<\/p>\n More cash enters the West Bank than Israel allows out<\/p>\n Central banks in most countries take back cash from commercial banks and credit them electronically so they can settle payments and meet customers\u2019 needs. But in the occupied West Bank \u2014 where Palestinians have no say over monetary policies guiding the shekel \u2014 the economy runs differently.<\/p>\n The territory has relied predominantly on the Israeli shekel for decades and depends on Israel<\/a> to facilitate trade, collect taxes and process payments for imported goods under agreements dating to the 1990s. A surfeit of cash accumulates because the Palestinian economy runs almost exclusively on physical currency, and more enters from Israel than can exit. <\/p>\n Why? Employers in Israel and its settlements pay Palestinian laborers in cash, and Palestinian citizens of Israel often purchase goods like cigarettes and fuel in the West Bank, bringing in even more shekels. As more cash flows in, the surplus trapped inside Palestinian banks grows, neither earning interest nor getting turned into loans, investments and bill payments. <\/p>\n Israel’s cash transfer limit from the West Bank’s banking system is 18 billion shekels ($5.9 billion) a year. Banks now accumulate an estimated 30 billion shekels a year, said Moayad Afaneh, an economist who has advised the Palestinian Authority. <\/p>\n In the past, Israeli officials expressed reluctance to accept more, citing concerns that returned money could be linked to laundering, tax evasion or terrorism.<\/p>\n Bank of Israel said in a statement that it follows the current government’s policy on how many shekels to accept but that fewer Palestinians have worked in Israel since the war in Gaza started, thereby reducing the cash entering the West Bank. <\/p>\n Israeli Finance Minister Bezalel Smotrich<\/a> ‘s office did not respond to requests for comment but in September 2025<\/a> Smotrich threatened to \u201cuse all of the tools\u201d at his disposal to prevent the creation of a Palestinian state, including \u201ceconomic strangulation.\u201d<\/p>\n Palestinians say Israel limits taking shekel as economic leverage<\/p>\n Israel has imposed a series of measures<\/a> that have hobbled the West Bank\u2019s economy since Hamas-led militants attacked in October 2023, starting the war in Gaza.<\/p>\n