Israel advances bill to seize Palestinian Authority funds transferred to Gaza

Israel’s Knesset, Jerusalem, on 8 July 2026

Noa Shpigel and Liza Rozovsky report in Haaretz on 9 July 2026:

Israel’s Knesset is advancing a bill that would enable seizing more funds from the Palestinian Authority, seeking to confiscate each year an amount equivalent to the funds the authority transferred to the Gaza Strip during the previous year.

The Knesset on Wednesday took the first vote on the bill sponsored by MK Moshe Passal from Prime Minister Benjamin Netanyahu’s Likud party. The bill faces two more votes in the Knesset before becoming a law.

According to the bill, Israel will use the frozen funds to compensate people harmed by “acts of terrorism originating in the Gaza Strip.” The bill passed its preliminary vote with 12 lawmakers voting in favor and no opposition. It will now return to the Knesset Foreign Affairs and Defense Committee for further deliberations before the second and third votes.

Israel holds 14 billion shekels ($4.6 billion) in funds that it confiscated from the Palestinian Authority Treasury. Israel claims that these funds, collected as customs duties on Palestinian imports, are being used to support terrorism.  As the withheld sums accumulate month after month in Israel’s treasury, the Palestinian government in Ramallah has been forced to adopt increasingly severe austerity measures to cope with the steady deterioration that has persisted for nearly three years.  The withheld funds have been accumulating since 2019, with roughly 400 million shekels (about $132 million) added each month.

According to remarks obtained by Haaretz, IDF Central Command Chief Avi Bluth recently warned Netanyahu that the continued withholding of Palestinian Authority funds is among the factors that could trigger an escalation in the West Bank.

Another major driver of the economic downturn is the government’s ban on Palestinian workers entering Israel, despite reports that nearly all of Israel’s security services – except for Israel Police – support lifting the restriction.

In May, five sources familiar with the matter told Reuters that Washington was considering asking Israel to give some tax money it is withholding from the Palestinian Authority to U.S. President Donald Trump’s Board of Peace to fund his post-war plan for Gaza.

This came less than a month after Norwegian Foreign Minister Espen Barth said Oslo, which chairs the Ad Hoc Liaison Committee for the Palestinian Authority, hopes the United States will pressure Israel to release Ramallah’s tax revenues.

Later in May, the board admitted it cannot properly operate its institutions due to a lack of funding. In a semi-annual report submitted to the UN Security Council and obtained by Haaretz, the Board of Peace noted that it had not received part of the funding promised to it upon its establishment in February from several countries, primarily the United States and Gulf states.

The report also states that the National Committee for the Administration of Gaza, which is supposed to manage the Strip, cannot begin its duties due to a lack of adequate funding and because “other authorities” operating in the Strip do not allow it to do so.

On Monday, Hamas announced that the body that administers Gaza on its behalf has resigned to transfer its powers to the U.S.-backed technocratic committee.

Reuters contributed to this report.

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