Israeli Manufacturers Warn of Massive Export Losses as Banks Cut Palestinian Banking Services

The Manufacturers Association of Israel has issued a stark warning about the economic fallout from Israeli banks discontinuing banking mediation services for the Palestinian banking system. Bank Hapoalim and Discount Bank plan to stop providing these services by October 1, a move expected to disrupt financial transactions between Israel and the Palestinian Authority.

The association estimates that this disconnection will cause a combined annual damage of approximately 20 billion shekels to Israeli trade: around 15.2 billion shekels in exports and 5 billion shekels in imports from the Palestinian territories. These services have allowed Palestinian banks to conduct international money transfers, facilitating ongoing trade. Without them, nearly 10 Palestinian banks will be cut off from the Israeli shekel system.

Abraham (Novo) Novogrutsky, president of the Manufacturers Association, criticized the Finance Ministry for ignoring the issue and warned that the banking cutoff will not halt trade but push it into unregulated, cash-based shadow economies, increasing risks such as money laundering and terror financing. The disruption could also reduce imports from the Palestinian Authority, harming market competition and raising prices for Israeli consumers.

Economics division head at the Manufacturers Association, Netanel Heiman, highlighted the dilemma facing Israeli companies: cease trade to comply with the law, switch to foreign currency transactions, or resort to unregulated channels. He also noted that the banking cutoff could complicate wage payments to Palestinian workers employed in West Bank settlements, potentially impacting construction activity there.

The Manufacturers Association has urged the Finance Ministry to prepare in advance for the banking disconnection by establishing a legal, documented, and supervised payment mechanism. This would allow banks to continue operating without legal exposure and enable Israeli companies to maintain trade relations with the Palestinian territories.