Bipartisan Lawmakers Warn Israel’s Withholding of Palestinian Funds Risks Hamas, Iran Exploiting Economic Crisis in West Bank

Six Republican and Democratic congressmen are urging the Trump administration to prevent an economic collapse in the West Bank as Israel withholds billions of dollars in tax revenues from the Palestinian Authority.The rare bipartisan letter, addressed to Scott Bessent, Secretary of the Treasury, and Marco Rubio, Secretary of State, was signed by U.S. House Representatives Brad Schneider, Craig Goldman, Ann Wagner, Debbie Wasserman Schultz, Jimmy Panetta and Gus Bilirakis.The lawmakers said they were not asking for Israel to “relax vigilance against terror financing” but that continuing to withhold billions in “clearance revenues risks accelerating the West Bank’s fiscal collapse — an outcome that would serve the interests of extremist and Iran-backed groups, not Israel, nor the United States.”“We therefore urge you to work with Israel and the Palestinian Authority on practical, security-conscious mechanisms that keep clearance revenues flowing to legitimate Palestinian institutions while ensuring none are diverted to terror financing,” the lawmakers said. “There can be no doubt that the success of the West Bank is due in part to high levels of human capital and deep integration with Israel’s economy. Additionally, the West Bank private sector depends on functioning correspondent banking relationships and the timely transfer of clearance revenues collected by Israel on behalf of the Palestinian Authority,” the letter addedThe lawmakers warned that Hamas and other Iran-backed “bad actors” could seize the opportunity and exploit economic instability in the West Bank. “We are concerned that the Finance Ministry’s decision to hold clearance revenue transfers, combined with longstanding failures of governance and reform by the Palestinian Authority, is undermining these relationships and endangering the future of the West Bank,” the letter said. Since Hamas’ massacre on October 7 and the ensuing war in Gaza, Israel has withheld significantly larger amounts of tax revenue collected on behalf of the PA in the West Bank, citing its financial support for convicted terrorists.“We will not transfer funds that ultimately reach terrorists who harm Israeli civilians,” Finance Minister Betzalel Smotrich said in April this year. “Our policy is clear: every shekel intended to encourage terrorism or hostile activity will be offset and stopped. At the same time, we are acting responsibly to ensure that the funds are directed toward safeguarding the vital interests of the State of Israel,” he added. I 2025, Israel withheld $1.39 billion. At the same time, foreign aid to the PA significantly increased over the past couple of years, from $330 million in 2021 to over $1 billion in 2025. This, combined with alternative funding mechanisms, have so far prevented the PA from an economic collapse, according to a report by the Institute for National Security Studies in Tel Aviv. The “shifting the crisis,” method, described by the INSS, enables the PA to continue operating “even when it lacks sufficient cash to cover its expenditures in full.” “Rather than sharply cutting back on its activities or suspending the provision of services, it defers payments and rolls the burden of the crisis onto other actors in the economy. In practice, this means that the budgetary shortfall is financed by employees receiving only part of their salaries, suppliers and contractors waiting for payment, pension funds not receiving the full contributions owed to them, and Palestinian banks continuing to extend credit to the government,” the report said.

Bipartisan Lawmakers Warn Israel’s Withholding of Palestinian Funds Risks Hamas, Iran Exploiting Economic Crisis in West Bank

Bipartisan Lawmakers Warn Israel’s Withholding of Palestinian Funds Risks Hamas, Iran Exploiting Economic Crisis in West Bank

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