The economic conditions vital for the self-determination of Palestinians in the West Bank are being systematically dismantled, according to a new report from the International Crisis Group. This deliberate erosion of economic viability is fueled by Israeli restrictions on movement, the withholding of crucial revenue, and the seizure of land, measures that are actively preventing the emergence of a Palestinian state and driving the native population into a state of “grinding immiseration.”
The report, based on interviews with Palestinian business leaders, mayors, and government officials, details a financial crisis affecting companies, households, and the internationally backed Palestinian Authority. It asserts that Israeli policies suggest a concerted effort to “advance Israel’s own declared goal of extending its control and preventing a Palestinian state from emerging.”
For decades, 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 restrictions on land and trade, limiting their economic autonomy.
Systematic Dispossession
Today, the roughly 3.4 million Palestinians living in the West Bank face approximately 30% unemployment. Their economy has contracted substantially since the start of the Israel-Hamas war, now in its third year of the conflict.
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 a month, representing almost one-fourth of its overall economic output.
Many businesses are now struggling to pay workers, contractors, and suppliers. Private companies have reported 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 warns that “Palestinian society survives, but in a state of grinding immiseration. Absent remedies, the result will likely be a loss of hope and a growing risk of instability and greater violence.”
Sovereignty Undermined
The Palestinian Authority (PA), the largest employer and service provider in the occupied West Bank, is at the heart of this crisis. Government agencies have resorted to heavy borrowing to remain operational, even as public sector workers go unpaid and essential infrastructure, such as roads and water lines, crumbles. This inability to fund public services is preventing patients from accessing hospitals and children from attending school.
Most of the Palestinian Authority’s funding originates from taxes collected on goods entering the West Bank through Israeli ports, a critical mechanism of control given that Palestinians do not control their own borders. However, under hard-line ministers in 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, over one year ago.
Joost Hiltermann, International Crisis Group’s special adviser for the Middle East and North Africa and author of 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 underway 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.
Disagreements within Netanyahu’s government were also noted, with settler leaders and security officials often clashing on how to manage the Palestinian economy. Hiltermann quoted a security establishment perspective: “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 an elite interest in maintaining a controlled, yet dependent, status quo rather than assuming full responsibility for the consequences of their policies.