The United States issued a warning on Thursday regarding Israel’s decision to extend banking cooperation with Palestinian banks for only one month. U.S. officials cautioned that this “very short-term” extension could lead to “another looming crisis” by November 30. Following confirmation from Israeli Finance Minister Bezalel Smotrich’s office, U.S. Secretary of State Antony Blinken and Treasury Secretary Janet Yellen urged Israel to commit to a one-year extension to avoid economic instability in the West Bank, which could also have security implications for Israel.
The waiver allows Israeli banks to manage shekel transactions for Palestinian Authority services and wages without facing potential money laundering or terrorism financing charges. Without it, Palestinian banks risk isolation from Israel’s financial network. The World Bank has highlighted the precarious economic conditions in Palestinian territories, noting Gaza’s GDP dropped by 86% year-on-year in early 2024 amid ongoing conflict.
The latest round of violence escalated on October 7, 2023, when Hamas attacked Israel, resulting in significant casualties and hostages. Israel’s subsequent military response in Gaza has led to over 43,000 deaths and widespread displacement among the population.
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