Israel intends to allocate tax revenue collected for the Palestinian Authority to settle the PA’s 2 billion shekel ($544 million) debt to the state-run Israel Electric Corporation, Israeli Finance Minister Bezalel Smotrich said on Sunday.
Israel collects tax on goods that pass through Israel into the occupied West Bank on behalf of the Palestinian Authority and transfers the revenue to Ramallah under a longstanding arrangement between the two sides.
Since the Hamas-led attack on Israel on Oct. 7, 2023, triggered the war in Gaza, Smotrich has withheld sums totaling 800 million shekels earmarked for administration expenses in Gaza.
Frozen Funds In Norway
Those frozen funds are held in Norway and, he said at Sunday’s cabinet meeting, would instead be used to pay debt owed to the IEC of 1.9 billion shekels.
“The procedure was implemented after several anti-Israeli actions and included Norway’s unilateral recognition of a Palestinian state,” Smotrich told cabinet ministers.
“The PA’s debt to IEC resulted in high loans and interest rates, as well as damage to IEC’s credit, which were ultimately rolled over to the citizens of Israel.”
The Palestinian Finance Ministry said it had agreed for Norway to release a portion of funds from an account held since last January with 1.5 billion shekels, calling money in the account “a punitive measure linked to the government’s financial support for Gaza”.
The ministry said that as part of the deal, 767 million shekels of the Norwegian-held funds will be used by Israeli fuel companies to purchase weekly fuel over the coming months. A similar amount will be used to settle electricity-related debts owed by Palestinian distribution companies to the IEC.
Smotrich has been opposed to sending funds to the PA, which uses the money to pay public sector wages. He accuses the PA of supporting the Oct. 7 attack in Israel led by the Islamist movement Hamas, which controlled Gaza. The PA is currently paying 50-60% of salaries.
Deduction For ‘Martyr Payments’
Israel also deducts funds equal to the total amount of so-called martyr payments, which the PA pays to families of militants and civilians killed or imprisoned by Israeli authorities.
The Palestinian finance ministry said 2.1 billion shekels remain withheld by Israel, bringing the total withheld funds to over 3.6 billion shekels as of 2024.
Israel, it said, began deducting an average of 275 million shekels monthly from its tax revenues in October 2023, equivalent to the government’s monthly allocations for Gaza.
“This has exacerbated the financial crisis, as the government continues to transfer these allocations directly to the accounts of public servants in Gaza,” the ministry said.
It added it was working with international partners to secure the release of these funds as soon as possible.
(With inputs from Reuters)
