Israel Extends Rare Loan to Palestinians as Virus Hits Revenue

(Bloomberg) --

Israel will loan the Palestinian Authority as much as 800 million shekels ($228 million) over the next four months to make up for a critical loss of tax revenues during the coronavirus pandemic, according to an Israeli government official.

The rare deal was agreed to by both sides on Monday and the funds may start flowing as soon as next month, the official said, speaking on condition of anonymity to discuss a sensitive issue. It’s crucial money for the authority, which is struggling financially to combat the virus outbreak and has asked international donors to help fill a budget deficit that could reach $2.4 billion.

A spokesman for the Palestinian Finance Ministry didn’t respond to a request for comment.

Israel collects taxes from Palestinians employed in Israel as well as customs duties on imports and exports on behalf of the Palestinian Authority and transfers roughly 500 million shekels every month under a long-standing economic agreement between the two. But those revenues have dropped as the virus shuttered much of the local economy.

Interest Rate

Under the agreement, Israel will make up for the shortfall up to a maximum of 800 million shekels to ensure funding for key services including hospitals, according to the official.

Israel will charge a 1% interest rate over two years, following a half-year grace period, the official said.

Palestinian Finance Minister Shukri Bishara said last month he was seeking a funding agreement with Israel during the crisis. There have been more than 370 confirmed cases of the virus across the PA-run West Bank and Gaza, which is controlled by the Hamas group, with two deaths.

The cooperation contrasts with the prospect for increasingly tense ties as Israel has pledged to annex land it occupied since the 1967 Middle East war and which Palestinians want for an independent state.

©2020 Bloomberg L.P.

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