Israel holds Palestinian economy captive: analysts

The Gaza offensive is speeding up Israel's "annexation" of the Palestinian economy, say analysts, who argue it has been hobbled for decades by agreements that followed the Oslo peace accords.

While the Israel's offensive raging since October 7 has devastated swathes of Gaza, it has also hit the public finances and wider economy of the Israeli-occupied West Bank.

Israel is tightening the noose on the Palestinian Authority, which rules parts of the West Bank, by withholding tax revenues it collects on its behalf, economist Adel Samara told AFP.

Palestinian livelihoods have also been hurt by bans on labourers crossing into Israel, and by a sharp downturn in tourism in the violence-plagued territory, including a quiet Christmas season in Bethlehem.

Samara said that "technically speaking, there is no Palestinian economy under Israeli occupation -- our economy has been effectively annexed by Israel's".

The Palestinian economy is largely governed by the 1994 Paris Protocol, which granted sole control over the territories' borders to Israel, and with it the right to collect import duties and value-added tax for the Palestinian Authority.

Israel has repeatedly leveraged this power to deprive the authority of much-needed revenues.

But the Gaza offensive has further tightened Israel's grip, Samara said, with the bulk of customs duties withheld.

"Without these funds, the Palestinian Authority struggles to pay the salaries of its civil servants and its running costs," said Taher al-Labadi, a researcher at the French Institute for the Near East.

In February, Norway reportedly transferred to the Palestinian Authority about $115 million from Israel following a deal to release some of the frozen taxes.

Almost all Palestinian workers have also been forbidden from entering Israel for work, driving up unemployment across the territories.

The Palestinian Prime Minister Mohammed Mustafa bemoaned an "unprecedented financial crisis" during which his government's deficit had soared to $7 billion, more than a third of the territories' GDP according to the latest budgetary figures.