Palestinian Fund for Reconstruction and Development (PFRD) : Review October - December 2025

Overview & Synopsis

The Palestinian Authority (PA) faced one of its most dire fiscal crises in 2025. Following a Government of Israel (GoI) decision in late 2023 to significantly increase deductions from clearance revenues, the PA has been struggling to make ends meet. The monthly deductions were increased putatively to offset PA’s spending in Gaza. Since May 2025, the transfer of clearance revenues has been completely halted. As of the drafting date of this report, the PA has not received any such funds from the GoI, resulting in the loss of its main source of income. On a commitment basis, however, clearance revenues rose by 4 percent in 2025, year on year (y/y), driven by an increase in imports from a low base. On the domestic side, most tax categories - including income tax and VAT - witnessed a decline in 2025, reflecting ongoing economic instability in the West Bank. By contrast, domestic customs revenue rose by 40 percent driven by higher imports of used vehicles, whose taxable value is reassessed by authorities for domestic tax purposes. Non-tax revenue also increased by 20 percent, supported by the payment of the first 4G license fee by the telecommunications companies in June 2025 and higher investment profits from the Palestine Investment Fund (PIF) compared to the first nine months of 2024.