To settle the Palestinian government's $544 million debt to the state-run Israel Electric Company, the tax revenue Israel collected on behalf of the Palestinian Authority (PA) will be used.
The plan was announced a few days after Israel withheld part of the PA tax funds because of tensions between Israel and the PA. Israel collects taxes on goods passing through Israel into the West Bank and transfers the revenue to the PA.
Per Reuters, the funds that were withheld since October 2023, which were meant to be transferred for Gaza's administration expenses, are now diverted to pay for the electricity-related debt of the PA. The Palestinian Finance Ministry agreed to release part of the funds held in a Norwegian account to settle these debts. Some $208 million of the funds that had been withheld will pay Israeli fuel companies, and a similar amount will settle electricity-related obligations to IEC.
Such actions follow anti-Israeli steps, such as Norway granting a Palestinian state status, which placed a freeze on funds. It also freezes the so-called "martyr payments" the PA gives to families of militants or civilians who are killed or imprisoned by Israeli authorities. Until 2024, Israel froze more than $982 million, further deepening the financial crisis that the PA has been facing. The Palestinian Finance Ministry is working with international partners to retrieve these funds, which were deducted from tax revenues in the past months.
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How the Withheld Palestinian Funds Will Settle Debt
Israeli Finance Minister Bezalel Smotrich revealed that the PA would use some $218 million of the withheld funds to pay off part of its debt to the Israel Electric Company (IEC). Arab News explained that the reason for this is because IEC has been subjected to high interest rates and loans, which were later passed on to Israeli citizens. The development is linked to tensions following the PA's move to financially support Gaza, controlled by Hamas, during the war that broke out in October 2023.
Israel has withheld this money and sent it to debt repayment, which shows that the two parties are poles apart. The PA continues to see the portion of these funds, which is being used in the payment of public sector wages, although the financial challenge is huge.
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