Yellen presses Netanyahu to improve economic ties with West Bank

US Treasury Secretary says Israel has resumed transferring tax revenue to Palestinian Authority

Janet Yellen, US Treasury Secretary, speaks during a press conference in Sao Paulo, Brazil. AFP

Live updates: Follow the latest news on Israel-Gaza

US Treasury Secretary Janet Yellen on Tuesday said she has urged Israeli Prime Minister Benjamin Netanyahu to take steps to improve economic relations with the West Bank.

“I've written to the Prime Minister to discuss my concerns about the West Bank and actions that Israel has taken that I believe are seriously impairing the West Bank economy, reducing income and also, at the same time, having an adverse impact on Israel,” she said during a press conference at the G20 summit in Brazil.

Ms Yellen said the letter also stated Israel should reinstate work permits for Palestinians and reduce commerce barriers within the West Bank.

“These actions are vital for the economic well-being of Palestinians and … Israelis alike,” she said.

The letter, which Ms Yellen said had been sent “a day or two ago”, comes as the Palestinian economy is on the brink of collapse due to the war in Gaza.

Palestine's economy has experienced “one of the largest shocks” in recent history because of the war, with the impacts “extending far beyond any economic assessment”, according to a recent World Bank report.

Further restrictions on movement of Palestinians in the occupied West Bank could also force the Palestinian Authority to make more cuts to employee salaries, which would intensify the decline in consumption and household incomes, the World Bank said.

Israel has seen its own economy suffer because of the war. This month, its government reported that its economy contracted 19.4 per cent in the fourth quarter of 2023, and only grew by 2 per cent overall last year.

Palestinian browse stalls at a Friday market in Ramallah in June 2022. The Israel-Gaza war has had a devastating effect on the Palestinian economy. AFP

Ms Yellen said she welcomed Israel agreeing to resume the transfer of tax revenue to the Palestinian Authority, which would fund basic services and strengthen the West Bank's economy.

She added that “funds have started to flow”.

“This must continue,” she said.

Under a peace accord signed in the 1990s, Israel's Finance Ministry collects taxes on behalf of Palestinians and transfers them to the Palestinian Authority.

The flow of these funds accounts for about two thirds of the authority's revenue.

Israeli Finance Minister Bezalel Smotrich suspended the transfer of tax revenue to the Palestinian Authority after the October 7 attacks by Hamas.

As a result, the Palestinian Authority has not been able to pay salaries.

Ms Yellen said the conflict has not yet had a significant impact on the global economy.

The US also welcomed the World Bank's commitments to food security assistance in Gaza and economic support for the West Bank, as well as continuing economic programmes in Egypt and Jordan, she said.

She also noted recent actions the US has taken to counter financing for Hamas and other Iranian proxy groups.

Israeli forces raid money exchange shops in occupied West Bank – video