The Palestinian Authority’s complete economic collapse has been staved off by funds provided by the European Union and the World Bank, with only a fraction of support coming from Arab states, according to research published by the Institute of National Security Studies (INSS) last week.
The PA’s financial crisis has been well documented. Since Israel began withholding tax revenues in July 2018 to offset the PA’s pay-for-slay payments to terrorists and their families, the Fatah-led Palestinian governing body has faced growing financial constraints. The outbreak of war in 2023 further deepened the PA’s economic instability, as tens of thousands of jobs previously held by Palestinians in Israel were quickly lost and economic activity in the West Bank sharply declined.
Israeli politicians have spent years discussing the theoretical collapse of the PA, believing it imminent, though the authority has survived through 2026 with significant cuts to civil services and salaries of civil servants. This survival, INSS highlighted, is largely thanks to foreign aid from Western sources.
Without foreign funding, the PA would have operated under a structural deficit from as early as 2018, when its expenditure began exceeding its total self-generated revenues, a deficit that widened significantly after the Hamas-led October 7 invasion and massacre in 2023.
In 2023, the PA raised only NIS 3.9195 billion in domestic tax collection and NIS 1.591 billion in non-tax revenues, though total expenditure for the year was NIS 14,752 million.
The majority, NIS 10.035.4b., was made up of collections by Israel, while foreign aid provided NIS 755.2m.
Foreign aid offsets decline in PA tax revenues
Foreign aid jumped from NIS 755.2m. to NIS 2.517.8b. in 2024 to NIS 2.742.3b. in 2025. Notably, this came as collections from Israel fell to NIS 6.8568b. in 2024 and NIS 6.1557b. in 2025.
The foreign aid received, which does not include all the funds promised both to the PA and salaries to civil employees, has allowed the PA to avoid a deficit over the past two years.
Taxes and customs duties collected by Israel on the PA’s behalf in accordance with the Paris Protocol of 1994 indicate that while Jerusalem continues to collect these funds, the PA has ultimately received less of these funds. Until 2023, clearance revenue receipts amounted to approximately NIS 11-12b. annually, though Israel deducted funds to cover electricity, water, and other expenses incurred by the PA, resulting in it accessing approximately NIS 8.8b.
However, from 2023 onward, the government began withholding more of the funds to offset pay-for-slay payments and payments to PA staff in the Gaza Strip, leaving the authority with only NIS 7.9b. in 2023, NIS 4.4b. in 2024, and NIS 2b. in 2025.
Additionally, as of 2025, the PA no longer receives clearance revenues.
Before the outbreak of the war, international funding of the PA had steadily declined from NIS 2.4b. in 2018 to around NIS 1b. in 2021.
From 2023 onward, this trend has reversed significantly, with foreign aid jumping to NIS 3b. in 2024 and to approximately NIS 3.2b. in 2025.
In 2024, only NIS 611.22m. was provided by Arab states, with that figure falling to NIS 392.33m. million in 2025.
The European Union’s support surged from approximately NIS 327m. in 2023 to more than NIS 1.5b. in 2025. The World Bank’s support grew from about NIS 283m. to approximately NIS 838m. over the same period.
INSS noted that the surge in Western funds can likely be attributed to the growing perception in Europe that the PA is “an indispensable partner for any future diplomatic settlement – and that its collapse could destabilize the West Bank and undermine broader regional interests.”
As previously exposed by The Jerusalem Post, European funds are often put into Palestinian banks that are suspected of facilitating pay-for-slay payments.
The European Investment Bank (EIB) and the European Commission announced in June plans to inject the Palestinian economy with a €395m. investment. Though the funds are designed to bypass the PA, they will be channeled through financial institutions, such as the Bank of Palestine.
That bank has explicitly refused requests from Israel’s Finance Ministry to close 3,400 accounts reportedly used to distribute payments to released terrorists.
Outside of relying on international actors, INSS also noted that the PA has survived by shifting the burden of its deficit onto other economic actors. Wages for civil employees, pensions for the elderly, and payments to suppliers are delayed, paid in part, or never settled. Palestinian banks have also kept open a line of credit for the government.
In both 2024 and 2025, PA public sector employees received only around 70% of the salaries owed to them, with the unpaid balance recorded as future debt.
While this strategy has enabled the PA to continue functioning in the short term, the accumulating burden will erode its ability to provide public services.