Gaza's Cash Crisis and Economic Adaptations
In Gaza City, a new economic activity has emerged: banknote repair. Individuals like Baraa Abu al-Aoun operate roadside tables to mend worn currency, facilitating cash circulation in the region. This service has developed following the 2023 Hamas-led attack on Israel and the subsequent conflict, which resulted in Israel halting banknote transfers to Gaza. The conflict also led to the destruction or looting of most banks.
Challenges in Financial Access
Seven weeks after a ceasefire, some bank branches have reopened, but ATMs remain non-functional. This situation necessitates cash for essential purchases, leading residents to informal money merchants who charge commissions for converting digital transfers to physical cash. The circumstances have also accelerated the adoption of e-wallets and money transfer applications, increasing the utility of existing banknotes, regardless of their condition.
The United Nations Conference on Trade and Development (Unctad) reports that Gaza's entire population of over two million people has been pushed into poverty. Unemployment is estimated at 80%. Even those with income or savings encounter difficulties accessing cash.
Numan Rayhan, displaced in Gaza City, described the situation as a "shortage of income, shortage of money, no cash flow from the banks." Israeli officials stated that strikes targeted banks due to alleged links to Hamas, and vaults were subsequently looted by armed groups. The Palestine Monetary Authority (PMA) has reported that approximately $180 million in cash was stolen. Cogat, the Israeli defense body overseeing Gaza's border crossings, confirmed that cash has been restricted from entering Gaza based on a political order, citing Hamas's reliance on cash for military activities.
Market and Banking Responses
Zakaria Ajour, a market stall-holder, noted that the scarcity of circulating cash has created difficulties for both sellers and buyers. Merchants are increasingly reluctant to accept worn or damaged banknotes. Small change, such as ten-shekel coins, is also scarce, with its value impacted by inflation stemming from the cash crisis.
Lines have formed outside the Bank of Palestine in Gaza City, one of nine reopened branches across five banks. Services are limited to reactivating frozen accounts, opening new ones, and registering for banking applications. Asmaa al-Ladaa, seeking to receive funds from relatives, described the process as involving "chaos and crowds."
In Khan Younis, where banks remain damaged, residents like Abu Khalil face challenges accessing banking services, sometimes travelling to central Gaza for transactions. Abu Khalil reported that nearly half of his 2,000-shekel monthly salary from the Palestinian Authority is consumed by fees paid to vendors or money merchants.
During the conflict, informal money transfer and exchange services began charging commissions for converting electronic transfers to cash. These rates have reportedly reached up to 50% at times, though they have recently decreased. One anonymous money merchant indicated that commission rates fluctuate with market activity, commodity inflow, and aid distribution, potentially dropping to 20% when crossings are open and rising during closures.
Digital Payment Solutions and Aid
Electronic transfers via bank applications have become a common payment method, even for minor purchases, with shop owners charging minimal fees. The PMA has launched an instant transaction system for local bank accounts. The Bank of Palestine offers e-wallets, with over 500,000 users in Gaza, allowing transactions via text services on mobile phones without internet access.
Humanitarian organizations, including Unicef and the World Food Programme, utilize e-wallets to disburse financial aid directly to vulnerable families. Since early last year, Unicef has provided cash transfers to approximately one million people, half of whom are children, prioritizing amputees, orphans, and pregnant or breastfeeding mothers. Jonathan Crickx from Unicef stated that recipients primarily spend funds on food, water, hygiene items, and electricity via generators. He cited instances of high food prices, such as 2kg of tomatoes for $80 and 5kg of onions for $70.
Hanan Abu Jahel, displaced in al-Zawaideh, received 1,200 shekels from Unicef, which she used for basic food items like rice, lentils, and pasta. She noted the ongoing difficulty in affording vegetables, fruits, meat, and eggs due to high prices, particularly for her 12-person household.
Future Economic Prospects
The US President Donald Trump's 20-point peace plan includes an "economic development plan to rebuild and energise Gaza," proposing new investments and development ideas to create jobs and opportunities. However, the plan lacks detailed strategies for generating growth and stability. Concurrently, Unctad has warned that the Gaza Strip is experiencing its most severe economic crisis on record.