30 billion shekels now pile up in West Bank banks each year, far above Israel’s 18 billion-shekel annual return limit, leaving lenders unable to convert cash into electronic balances for payments and transfers.
That surplus builds because the West Bank relies heavily on physical shekels, with cash flowing in from Palestinian workers paid in Israel and shoppers from inside Israel, while banks say the Bank of Israel will not take enough notes back.
Banks short on vault space are accepting less cash from businesses and households, forcing companies to pay for storage, take loans or buy foreign currency just to pay suppliers.
Gas stations have already been hit: some temporarily shut pumps, and owners staged a 30-minute strike last month after cash stockpiles made it harder to import fuel and settle bills.
The squeeze adds to wider economic pressure since the Gaza war began in 2023, with Palestinian officials calling it economic warfare and warning the cash glut could disrupt imports of fuel, food and medical supplies.
Why is a flood of cash causing banks to close and businesses to fail in the West Bank?
Is Israel's shekel blockade a security measure or a tool of 'economic warfare' against Palestinian statehood?
Trapped Shekels, Looming Collapse: The 2026 West Bank Banking Crisis and Its Regional Implications
Overview
The West Bank is facing a severe banking paralysis, driven by an overwhelming surplus of Israeli shekels trapped within its financial system. This cash glut has left business leaders unable to access their earnings through traditional banks, severely disrupting normal financial operations. As the Palestinian Authority increasingly relies on local bank loans to cover its budget deficit, public debt has soared, further straining the banking sector. The crisis has led to visible impacts, such as gas station strikes and temporary closures, highlighting how the escalating cash crisis is crippling businesses and threatening essential services across the region.