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Smotrich says Israel to withhold millions from PA to repay electricity debt

Finance Minister Bezalel Smotrich has announced that Israel will start withholding money from the funds it collects on behalf of the Palestinian Authority in order to pay for the latter’s outstanding debt to the Israel Electric Corporation (IEC).

“No more. After many years of great injustice, Israeli citizens will stop financing electricity for the PA out of their own pockets,” Smotrich said in a Tuesday tweet.

“For many years, the Finance Ministry failed massively, and because of that Israeli citizens paid millions of shekels each month to fund the electricity consumption of the PA. From now on, I will deduct from the funds for the PA each month the entirety of its electricity consumption, and later on we will also deduct money to offset its past debts.”

Under the Oslo Accords, Israel is responsible for collecting customs duties and other tax revenues on behalf of Ramallah, due to the PA’s lack of statehood status. It then transfers the funds to the PA on a monthly basis, providing funds that amount to nearly 65 percent of the Palestinian annual budget.

The PA’s debt to the IEC currently stands at NIS 2 billion ($525 million), according to the Israel Hayom paper.

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Israel has intermittently announced cuts, amounting to hundreds of millions of shekels this year alone, to the funds it transfers to the PA, citing Ramallah’s payment of stipends to the families of terrorists as well as prisoners jailed for terror offenses.

Finance Minister and Religious Zionism party chief Bezalel Smotrich leads his party’s faction meeting at Jerusalem’s Knesset, May 8, 2023. (Oren Ben Hakoon/ Flash90)

In 2018, Israel passed a law requiring that a sum equal to the monthly stipends the PA pays be withheld from the tax revenues it transfers to the Palestinians. This law has not been regularly enforced, but the finance minister has from time to time announced such cuts.

Israel’s security establishment has warned that withholding funds to the cash-strapped PA could risk leading to its collapse.

In a response to the deductions announced by Smotrich for the electricity debt, Palestinian Authority Prime Minister Mohammed Shtayyeh said to government news agency Wafa that the debt had been incurred by the Jerusalem District Electricity Company, a private company that supplies electricity to consumers in East Jerusalem and the Palestinian districts of Bethlehem, Ramallah and Jericho.

The company, which supplies electricity to 30% of Palestinian households, does not have its own power stations, but buys over 95% of its electricity from the IEC and the remainder from Jordan for the Jericho area. Shtayyeh noted that the company is not affiliated with the PA, and therefore the deduction of a private debt from the funds destined to a public authority equals “systematic piracy and theft,” and constitutes a “declaration of a financial war.”

The measures imposed by Israeli authorities on the Palestinian Authority are “a recipe for explosion,” and are implemented “in defiance of international laws while taking advantage of the absence of accountability and the feeling they have of being safe from punishment,” Shtayyeh added. He called on the United States and European Union countries to intervene to stop the move.