ByDANIELLE GREYMAN-KENNARDJULY 26, 2026 15:28Updated: JULY 26, 2026 15:35The Palestinian Authority’s complete economic collapse has been staved off by funds provided by the European Union and World Bank, with only a fraction of support coming from Arab states, according to research published by the Institute of National Security Studies 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 PA 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 Hamas’s October 7 invasion 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, 10.035.4 billion, was made up of collections by Israel, while foreign aid provided NIS 755.2 million.A subtle sign hangs on the wall of the World Bank headquarters building on July 23, 2026, in Washington, DC. (credit: J. David Ake/Getty Images)Foreign aid offsets decline in PA tax revenuesForeign aid jumped from NIS 755.2 million to NIS 2.517.8 billion in 2024 and to NIS 2.742.3 billion in 2025. Notably, this came as collections from Israel fell to NIS 6.8568 billion in 2024 and NIS 6.1557 billion 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, have shown that while Jerusalem continues to collect these funds, the PA has received less of this money.Until 2023, clearance revenue receipts amounted to approximately NIS 11–12 billion annually, though Israel deducted funds to cover electricity, water, and other expenses incurred by the PA, leaving the PA with approximately NIS 8.8 billion. 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 7.9 billion in 2023, NIS 4.4 billion in 2024, and NIS 2 billion 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 in recent years from NIS 2.4 billion in 2018 to around NIS 1 billion in 2021. From 2023 onward, this trend has reversed significantly, with foreign aid jumping to NIS 3 billion in 2024, and to approximately NIS 3.2 billion in 2025.In 2024, only NIS 611.22 million was provided by Arab states, with that number falling to only NIS 392.33 million in 2025. The European Union’s support surged from approximately NIS 327 million in 2023 to more than NIS 1.5 billion in 2025 and the World Bank’s support grew from about NIS 283 million to approximately NIS 838 million 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.”European funds are often put into Palestinian banks that facilitate pay-for-slayAs 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 €395 million investment. Though the funds are designed to bypass the PA, they will be channeled through financial institutions like the Bank of Palestine. The bank has explicitly refused requests from the 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 to the government.In both 2024 and 2025, public sector employees received only about 70 percent of their salaries, 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.Follow us on Google