The report attributed the financial crisis to the cessation of U.S. funding for the Palestinian Authority by Congress, and the Israeli occupation withholding tax revenues after the October 2023 war, which could lead to Mahmoud Abbas being excluded from plans to lead the post-war military phase in the Gaza Strip.

The newspaper quoted U.S. officials as saying that Washington is trying to circumvent a law that prevents it from directly contributing to the Palestinian Authority, and also urging allies to provide more support, but if this is not achieved by the end of February and the economy collapses as expected, this aspect may be outside Washington’s plans as indicated by WSJ.

 American Efforts towards Alternatives to the Palestinian Authority

The report states that Palestinian officials have warned of their inability to pay salaries and provide essential government services after the end of February 2024, jeopardizing U.S. hopes that the Palestinian Authority would be able to govern Gaza as it seeks “an active and updated Palestinian Authority” as the best option for managing the Palestinian sector.

According to U.S. officials, the depletion of Mahmoud Abbas’s authority funds would expose it to being aligned with groups opposing settlements with the occupation, exacerbated by the deteriorating security situation in the West Bank and the increasing clashes between Israeli occupation forces and Palestinian militants, as well as attacks by Israeli extremists.

The Israeli Occupation Finance Minister, Bezalel Smotrich, had stopped transferring all tax revenues, which were previously transferred monthly to the Palestinian Authority, pending approval from the ministry, and then suspended revenues allocated to Palestinian Authority employees in Gaza only, while the Palestinian Authority stated that it would not accept any partial transfers of revenues.

According to official estimates, the Palestinian Authority pays salaries to around 150,000 employees in the public sector in the West Bank and Gaza Strip.

Limited Funding Capacity for the Authority and Allegations of Corruption and Evasion

According to The Wall Street Journal, Washington’s capacity to fund the Palestinian Authority has also become limited after the passage of the “Taylor Force Act” in Congress in 2018, which suspended U.S. bilateral economic assistance to the Palestinian Authority because it was accused of providing payments to Palestinians accused of terrorism and their relatives.

In the same year, former President Donald Trump directed the State Department to withdraw $200 million in aid originally planned for programs in the West Bank and Gaza, after reviewing U.S. assistance to the Palestinian Authority.

After Biden took office, he reversed this and restored much of the aid, which is not subject to the “Taylor Force Act” ban on direct assistance, while resistance within Congress continues to re-fund the Palestinian Authority.

Members of the Senate affirm that the Palestinian Authority is “completely corrupt” and objected to including Palestinian aid funding, describing Biden’s move as a possible way to circumvent the restrictions of the “Taylor Force Act.”

According to the report, it is unlikely that European allies of America will increase financial support to the Palestinian Authority, indicating that its financial collapse is inevitable and that it is threatened in the West Bank before it qualifies to lead the situation in Gaza.