Electronic transactions expected to expand as officials seek solutions to surplus shekel restrictions and financial pressures
The Palestinian Monetary Authority (PMA) plans to expand electronic payment systems as part of a broader strategy to address the banking sector’s growing cash crisis, Deputy Governor Mohammad Manasra said in remarks published by the Palestinian Authority’s WAFA news agency.
According to Manasra, the initiative aims to gradually reduce dependence on physical cash while strengthening the financial system. The move comes as Palestinian banks continue to face challenges handling surplus Israeli shekels due to restrictions on transferring excess currency to Israeli correspondent banks.
Current arrangements allow Palestinian banks to return up to NIS 18 billion annually through designated Israeli banks. However, economists argue that the limit no longer reflects the size of the Palestinian economy, resulting in large volumes of surplus cash remaining inside the banking system.
Cash restrictions increase pressure on banks
Manasra said banks have increasingly struggled to accept additional shekel deposits because of the growing accumulation of physical currency. Consequently, individuals and businesses have encountered greater difficulty conducting routine financial transactions.
He added that discussions are continuing with the Bank of Israel and international partners to seek an increase in the current transfer limit. Responsibility for approving the arrangement shifted to the Israeli government in October 2023.
Meanwhile, financial analysts have warned that surplus cash could restrict banks’ ability to finance cross-border trade, particularly given the extensive commercial relationship between the Palestinian territories and Israel.
Digital payment rollout planned over two years
Manasra said recently approved legislation designed to reduce cash-based transactions aims to strengthen the economy rather than place additional burdens on citizens. Authorities intend to implement the reforms gradually as electronic payment infrastructure expands across the financial sector.
The PMA expects the transition toward broader digital payments to take place over approximately two years. Officials believe the modernization effort will improve financial efficiency, enhance payment security and reduce dependence on physical currency while supporting the stability of the Palestinian banking system.
