Smotrich's Move: Banking Strains Amid Political Tensions

In a significant financial maneuver, Israel's Finance Minister Bezalel Smotrich has withdrawn a waiver facilitating cooperation between Israeli and Palestinian banks, a move poised to jeopardize the Palestinian banking system's connection to Israel's financial channels.

Smotrich justified this decision, citing a global "delegitimization campaign" by the Palestinian Authority against Israel. The prior waiver enabled Israeli banks to handle shekel transactions related to the Palestinian Authority without facing allegations of money laundering and extremism financing.

Removal of this waiver threatens to sever Palestinian banks from the Israeli financial realm, amid the Palestinian Authority's struggles with dwindling foreign aid, constrained tax revenue flows, and diminished remittances due to the Gaza conflict. The decision closely follows sanctions from the UK and others against Smotrich for incitement activities in the West Bank, imposing asset freezes and travel bans.

(With inputs from agencies.)