GAZA (Reuters) - The World Bank said on Saturday that Israel’s tightened blockade of the Hamas-run Gaza Strip had created cash shortages that could lead to the collapse of banks in the impoverished Palestinian territory.
Also sounding an alarm, the International Monetary Fund (IMF) said the spiraling Gazan crisis risked bolstering Palestinian militants who have alternative supplies of cash and contraband thanks to smuggling tunnels from neighboring Egypt.
Banks across Gaza have been shut since Thursday because they don’t have enough money to operate. Israel cut off imports of cash and other goods this month as cross-border violence rose.
“The liquidity crisis could lead to the collapse of the commercial banking system in Gaza,” the World Bank said in a statement, warning also that this could entail “serious humanitarian implications” for 1.5 million Palestinians there.
Israel was urged “to move swiftly to restore cash liquidity in Gaza bank branches” before the three-day Muslim Eid al-Adha feast that begins on Monday.
Israel allowed dozens of truckloads of food and medical supplies into Gaza on Thursday, but it was unclear when it would let cash into the coastal enclave to replenish currency stocks.
Palestinian Prime Minister Salam Fayyad, whose Western-backed government is based in the Israeli-occupied West Bank, said this week that there was not enough cash in Gaza to cover salaries for more than 77,000 government workers.
Fayyad said 250 million Israeli shekels ($63 million) was needed to pay these salaries but Gaza’s banks had only 47 million shekels.
Israel tightened its blockade of Gaza a year ago after Hamas wrested the territory from secular Fatah forces loyal to President Mahmoud Abbas, who favors peace talks with Israel.
The closure was stepped up after a raid by Israeli forces on November 4 triggered a surge in rocket attacks by Gazan militants.
Cash-strapped Palestinian civil servants could prove easy recruits for militants groups, the IMF said in a statement:
“The inability of employees and aid beneficiaries to draw their salaries and aid payments, raises the risk that, over time, these groups would turn to employment opportunities and benefits provided by those with easier access to cash from other sources (such as through the tunnels between Gaza and Egypt).”
An Israeli military spokesman said at least 15 rockets and mortar bombs have been fired from Gaza at Israel since Thursday, but there were no casualties. An Israeli defense official said the Gaza closure would remain in place on Sunday.
Faris Hadad-Zervos, an aide to Middle East peace envoy Tony Blair, voiced understanding for Israel’s security concerns but said the Gaza closure appeared to be backfiring by helping “black-market imports and operations in the strip, whose profitability has increased as a result of the closures.”
Writing by Allyn Fisher-Ilan and Adam Entous; Editing by Matthew Jones