An economy without its own currency

The Palestinian Monetary Authority, created in 1994 under the Oslo agreements and the Paris Protocol, regulates banks and the payment system in the West Bank and Gaza, but it is not a full central bank: there is no Palestinian currency, and the Israeli shekel, Jordanian dinar and US dollar are all in use. As a result, the authority cannot set interest rates or print money, and inflation follows prices in Israel and its trading partners. Much of the budget relies on customs and VAT revenue collected by Israel on imports and transferred to the Palestinian Authority, and disputes and withholding of this revenue have repeatedly caused fiscal crises. Conflict and movement restrictions, especially in Gaza, which suffered a collapse in output in 2023 and 2024, are the main explanation of the economy's volatility, not monetary policy.