Analytical Overview of Palestinian Government Revenues and Expenditures for 2025 (Cash Basis) amid Fiscal

The Palestinian government's financial data for 2025, on a cash basis, reflect a highly complex fiscal reality, characterized by a high degree of reliance on limited domestic resources and continued exposure to strict external constraints, most notably the detention and deduction of clearance revenues. This reality has formed a combination of structural fiscal distress and deliberate political constriction, which has directly affected the government's ability to meet its basic obligations.

Net actual public revenues achieved during 2025 amounted to about 11.230 billion shekels, compared with budgeted revenues in the general budget of 15.876 billion shekels, a realization rate not exceeding 71%. This large gap indicates a chronic financing shortfall, managed annually through exceptional instruments, the most important of which are external financing and the accumulation of arrears.

The composition of public revenues shows an almost complete dependence on taxes, which constituted 83% of total revenues, while the contribution of non-tax revenues did not exceed 17%. Here the central role of the Palestinian citizen as the principal financer of the general budget stands out, whether through direct or indirect taxes or various fees, with estimates indicating that approximately 95% of public revenues originate from domestic consumption.

The sources of tax revenues consist of the following:

1-      Local taxes amounting to 3.219 million shekels: deriving from: income tax of 987 million shekels, value-added tax of 1,326 million shekels, customs of 434 million shekels, cigarette levies of 437 million shekels, property tax of 29 million shekels, and beverage levies of 6 million shekels.

2-      External taxes: clearance revenues of 6,089 million shekels (after deductions and discounts amounting to 4,304 million shekels, out of clearance revenues due totaling 10,293 million shekels, after deducting an administrative commission of 3% by the Israeli occupation authorities as a collection commission, amounting to 244 million shekels)

●       As for the details of the sources of clearance revenues due for 2025, totaling 10,293 million shekels, they derive from the following external taxes:

1-    Customs of 4,557 million shekels

2-    Value-added tax of 2,350 million shekels

3-    Purchase tax of - deducted (38 million shekels)

4-    Petroleum tax of 3,424 million shekels

5-    Income tax of 244 million shekels

6-     Administrative commission deduction of 3% amounting to (- 244 million shekels), a collection commission for the Israeli side

As for net clearance revenues, they reached 6,089 million shekels, after the deduction of amounts totaling 4,204 million shekels from clearance revenues during 2025 (10,293 million shekels), in addition to an administrative collection commission of 3% amounting to 244 million shekels which was already deducted above.!

At the heart of this scene, clearance revenues stand as the largest and at the same time most fragile resource. Although total clearance revenues due for 2025 amounted to 10.537 billion shekels, what was actually transferred to the Palestinian Treasury did not exceed 1.951 billion shekels in cash, i.e., only 18.5%. This resulted from a combination of detentions, deductions and administrative discounts, which together exceeded 8.5 billion shekels.

The Israeli deductions (4,204 million shekels) were distributed across electricity bills (1,613 million shekels), water (370 million shekels), hospitals (174 million shekels), and other deductions (1,786 million shekels), in addition to discounts and seizures related to the Gaza Strip and prisoners; the clearance revenues withheld in 2025 (an amount of 4,137 million shekels) have turned clearance revenues from a financial instrument into a means of sustained political and financial pressure. This has undermined the government's ability to carry out stable financial planning and converted the general budget into a framework for crisis management rather than a development tool.

On the expenditure side, total expenditures and net lending reached about 12.370 billion shekels, and current expenditures continued to consume the largest share of spending, notably salaries and wages that exceeded 5.8 billion shekels; current transfers of 1.879 billion shekels; and net lending of 1.274 billion shekels, noting that the stock of accumulated arrears by the end of 2025 reached 21.004 billion shekels, of which 7.522 billion shekels are due to the private sector, reflecting the limited fiscal space available to the government and its weak ability to reorient spending toward productive and developmental sectors!

As for the fiscal deficit, it amounted to about 1.681 billion shekels before financing, which was covered primarily through external financing that amounted to 3.225 billion shekels, of which (an amount of 2,742 million shekels in external support for the budget, including Arab grants provided by the Kingdom of Saudi Arabia in the amount of 392 million shekels, and an amount of 2,350 million shekels from donor countries topped by the European Palestinian Mechanism for Support and Aid Management that provided from these external grants an amount of 1,368 million shekels; an amount of 1,085 million shekels of which was disbursed to civil service employees and retirees, support to Jerusalem hospitals of 110 million shekels, support to West Bank hospitals of 86 million shekels and 86 million shekels for the pharmaceuticals sector), while the World Bank provided 838 million shekels... in addition to limited domestic financing (local bank financing of 359 million shekels). It is noted that Arab support was effectively limited to a single contribution from the Kingdom of Saudi Arabia, while the government increasingly relied on European and international financing.

In conclusion, the Palestinian government's finances for 2025 show a model of an economy operating under constraints, where the budget is managed in an abnormal political context and financial resources are used as instruments of pressure, amid the absence of sovereignty over the most important revenue sources. This reality calls for rethinking the existing financial model, seriously exploring tools to reduce dependency, enhancing transparency, and reprioritizing spending to serve economic and social resilience.