The economy of the West Bank is approaching a critical breakdown, hindered by restrictive measures imposed by Israel, according to a recent report from a prominent conflict monitoring group. The International Crisis Group highlights that Israeli policies restricting movement, withholding tax revenues, and expropriating land are severely damaging the Palestinian economy and increasing the risk of instability in the region.

The report, released on June 15, is based on interviews with Palestinian business leaders, municipal officials, and government representatives. It underscores the financial crisis affecting private companies, households, and the Palestinian Authority (PA)—the body responsible for administering Palestinian areas in the West Bank. The group contends that these Israeli policies align with a declared goal of expanding Israeli control and preventing the emergence of a sovereign Palestinian state.

Palestinians in the West Bank, numbering roughly 3.4 million, endure unemployment rates near 30 percent and a sharply contracted economy, trends exacerbated following the Hamas attack on October 7, 2023. In the aftermath, Israel revoked work permits for nearly 200,000 Palestinians employed in Israel, citing security concerns. This move eliminated approximately $400 million in monthly income from the Palestinian economy, equivalent to nearly a quarter of its total output.

The report details that many Palestinian businesses now face severe financial strain, with revenue declines estimated at 50 percent compared to pre-war levels. These losses stem from tightened Israeli movement restrictions, disrupted supply chains, and pervasive uncertainty. The deteriorating economic conditions leave Palestinian society in a state of "grinding immiseration," raising fears of increased instability and potential violence if conditions remain unaddressed.

The Palestinian Authority, as the largest employer and service provider in the West Bank, is central to this burgeoning crisis. Government agencies have resorted to heavy borrowing to maintain operations amid chronic nonpayment of public sector wages. Key infrastructure such as roads and water systems are reportedly worsening, and essential public services—including healthcare and education—are increasingly inaccessible.

A critical factor underlying the PA’s fiscal distress is Israel’s control over border crossings, through which taxes on goods entering the West Bank are collected. Under Prime Minister Benjamin Netanyahu’s hard-line government, Israel has withheld billions of dollars in tax revenue owed to the PA and imposed unilateral deductions. Notably, no tax transfers have occurred since May 2025, further destabilizing Palestinian governance.

Joost Hiltermann, the International Crisis Group’s special adviser on the Middle East and North Africa and author of the report, noted that global attention has largely centered on the Gaza conflict, overshadowing the West Bank’s deteriorating situation. He highlighted internal disagreements within the Israeli government, with settler groups and security officials clashing over strategies concerning the Palestinian economy.

Hiltermann cautioned that the Israeli security establishment generally opposes the collapse of the Palestinian Authority, recognizing that such an outcome would compel Israel to fully assume governance responsibilities over an effectively destroyed territory.

The report calls for urgent international engagement to address the economic and political challenges facing the West Bank, warning that continued deterioration could profoundly undermine prospects for peace and stability in the region.