The economic foundations for any Palestinian future beyond permanent subjugation are being systematically dismantled by Israeli state policies, according to a new report from the International Crisis Group. These measures, which include restricting movement, withholding revenue, and seizing land, are crippling the Palestinian economy and fueling deep instability in the occupied West Bank.
The International Crisis Group report, based on interviews with Palestinian business leaders, mayors, and government officials, details a financial crisis impacting companies, households, and the internationally backed Palestinian Authority. Israeli policies suggest a concerted effort to “advance Israel’s own declared goal of extending its control and preventing a Palestinian state from emerging,” the report states.
Mechanisms of Control
Throughout decades of military occupation, the Palestinian economy has been hobbled by checkpoints and military gates that curtail the movement of people and goods. Households and businesses have become heavily reliant on jobs and imports tied to Israel, while simultaneously facing severe restrictions on land and trade. The approximately 3.4 million Palestinians living in the West Bank currently face roughly 30% unemployment. Their economy has contracted substantially since the start of the Israel-Hamas war.
Following Hamas’ Oct. 7, 2023, attack, Israel revoked work permits for most of the nearly 200,000 Palestinians who had previously worked there. This action, cited by officials as a security measure, deprived the Palestinian economy of nearly $400 million each month, representing almost one-fourth of its total economic output.
Many businesses in the West Bank are struggling to meet payroll for workers, contractors, and suppliers. Private companies have experienced an estimated 50% decline in business since before the war, a direct consequence of tightened movement controls, disrupted supply chains, and heightened uncertainty. The report concludes that “Palestinian society survives, but in a state of grinding immiseration,” warning that “absent remedies, the result will likely be a loss of hope and a growing risk of instability and greater violence.”
The State's Imperial Logic
The Palestinian Authority, as the occupied West Bank’s largest employer and service provider, is at the heart of this crisis. Government agencies have resorted to heavy borrowing to remain operational, while public sector workers go unpaid and essential infrastructure, such as roads and water lines, deteriorates. This inability to fund public services directly prevents patients from accessing hospitals and children from attending school.
The majority of the Palestinian Authority’s revenue is derived from taxes collected on goods entering the West Bank through Israeli ports, as Palestinians do not control their own borders. However, under hard-line ministers within Israeli Prime Minister Benjamin Netanyahu’s government, Israel has withheld billions of dollars in owed tax revenue and unilaterally imposed deductions on these funds. No transfers have been made since May 2025, which was 1 year ago.
Joost Hiltermann, International Crisis Group’s special adviser for the Middle East and North Africa, who authored the report, noted that the world’s focus on more than two years of war in Gaza has diverted attention from the West Bank. He stated that the changes currently unfolding in the West Bank could have arguably wider consequences for Palestinians’ future aspirations. Hiltermann also reported that Israeli officials, who exert considerable control over many of the policies in question, did not agree to be interviewed for the report. He highlighted internal disagreements within Netanyahu’s government, where settler leaders and security officials often clash on the management of the Palestinian economy.
Hiltermann quoted a security establishment perspective, stating, “The security establishment doesn’t want the Palestinian Authority or economy to collapse because they would have to assume the burden of governing the territory in full after essentially destroying it.” This reveals a strategic calculation by the Israeli state to maintain a degree of Palestinian administration, even as its policies dismantle the economic basis for self-determination, thereby preserving its own imperial garrison while avoiding the direct costs of full occupation.