Updated January 28, 2026 at 8:24 AM HST
RAMALLAH, West Bank — Khaled Hammad, the owner of a grocery store just outside Ramallah, tallies up his daily sales and debts.
"It is bad. Very bad," he sighs. Six months ago, he taped a sign to the shelf behind him, written with thick, red marker: "Please do not embarrass me. Credit is not allowed."
Hammad himself has also run out of money.
Most of his customers in this mixed Christian and Muslim village of Ein 'Arik once worked in Israel. They were among more than 130,000 Palestinians in the West Bank who Israel officially allowed to cross a long separation wall to do day jobs in Israel, where they say before the war, they used to earn three or four times the pay of what they could earn in the West Bank.
But since the Oct. 7, 2023, Hamas-led attack on Israel from Gaza, Israel has frozen most worker permits for Palestinians. About a fifth of the West Bank's economy suddenly vanished, according to the Palestinian Authority, which governs much of the occupied territory.
Israel has constructed hundreds of new barriers, including gates and checkpoints, across the West Bank, further stifling economic activity.
More than two years on, West Bank GDP data shows the signs of an economic depression, its economy shrunk by nearly a fourth last year, according to Palestinian Authority statistics. (The economy of the Gaza Strip is even more devastated, with the World Bank estimating it contracted by 83% in 2024 compared to the previous year, before the war began).
"We might reach a situation where there is a complete collapse of the Palestinian Authority's institutions," warns Rashad Yousef, a deputy economics minister with the Palestinian Authority in Ramallah.
Desperate to work
Mahmoud Bhais once worked as an electrician, crossing a separation wall from the West Bank into Israel-controlled East Jerusalem each day.
Some of his friends used to have permits to travel from Gaza to Israel, to construct a concrete and barbed-wire separation wall between the two. He used to consider such work beneath him, but now he is so desperate, he says he'd do that kind of job too. "What other choice do I have?" Bhais says.
On a recent damp winter day, NPR visited a stretch of the West Bank wall that directly abuts East Jerusalem. People working at an auto repair shop directly across from the 26-ft. high wall on the West Bank side said they still saw Palestinian men surreptitiously climbing over the wall daily, because they want work in Israel.
Used teargas shells littered the ground at the foot of the wall, their contents still stinging the air. Israeli soldiers have shot several West Bank Palestinian men climbing the wall trying to get to work.
Israel still allows around 9,000 Palestinians in the West Bank to work in illegal Israeli settlements in the Palestinian territory, and continues to issue about 7,000 permits for Palestinians for work within Israeli territory that is deemed critical. But Israel has not restarted issuing the vast majority of permits for work in Israel.
The appetite among Israelis to restore permits for Palestinians to work in Israel is low. Last month, a man from the West Bank working without a permit in Israel killed two people in the north, stoking more fear and anger among the Israeli public.
"It is ironic because this policy [of Israel issuing permits to Palestinians] started because economic integration, it was seen as a tool to reduce tension and support stability," says Avia Liberman, an Israeli economic analyst. "The army and the ministry of defense, in contrast to today, were actually supporting bringing Palestinian workers to Israel."
Liberman has recently written in support of reinstating worker permits, pointing to research from an Israeli think tank closely associated with Israel's military which found that attacks carried out by Palestinian workers in Israel are rare.
"Israel used the work permits as a tool to reward or punish the Palestinian Authority," he says.
"We don't control our borders"
The Palestinian Authority, which governs much of the West Bank, is also running out of money. It is one of the largest employers of West Bank Palestinians, but as its budgets shrink, it has slashed salaries, sending jitters throughout the Palestinian economy.
Most of its fiscal woes stem from the fact that since 2019, Israel has withheld about 8 billion shekels, more than $2.5 billion, in customs duties and taxes owed to the Palestinian Authority — freezing payments because it says the authority uses the money in part to pay the families of people whom Israel considers terrorists.
The PA is also under pressure from the U.S. and the European Union to undergo political reforms ahead of its first scheduled elections in 15 years later this year. But PA leaders say in the West Bank they are caught in a bind: Most of the tools for economic reform are in Israel's hands.
"Reform is a priority, and reform is something important for the Palestinian people, but it should not be a condition in our independence and in our life," says Omar Awadallah, deputy foreign minister for the Palestinian Authority.
The West Bank uses the Israeli currency, the shekel, and since occupying the West Bank and Gaza in 1967, Israel controls all the territories' borders as well.
Zayne Abudaka, the head of MENA Labs, an economic consultancy in the West Bank, says trade is difficult because the West Bank doesn't control its own borders, and before the war, it depended on revenue from the many Palestinians who worked in Israel. "That has many implications regarding trade, regarding tariffs, regarding all of the things that have to do with the movement of goods, people and even capital across borders."
He says the Gaza war and political uncertainty about the West Bank's future — amid threats from far-right Israeli lawmakers to fully annex the territory — are scaring away potential investors. Unemployment is officially at 28%.
Yousef, the PA deputy economic minister, says West Bank authorities are trying to absorb an excess of unemployed workers by finding them jobs in agriculture and construction or helping them start new businesses. But he admits that is a daunting prospect given that the overall economy is already weak.
Running out of money
The current economic devastation has cascaded down to every level of the Palestinian economy.
Ibrahim El Ajrab builds apartments in the West Bank, but says since Palestinians stopped going to work to Israel, no one has money to buy them.
His children only go to school two or three times a week. With a big portion of its revenues held by Israel, the Palestinian Authority is running out of money and has not been able to pay public school teachers their full salaries.
Then there are the checkpoints. Farmers like I'tidal Rawagh have been stymied from selling their goods to Israel because of stricter checkpoints and hundreds of new barriers built by Israelis since the war that can suddenly cut off movement for Palestinians both inside and leading out of the West Bank.
She stands among verdant rows of green beans, the vines spiraling overhead. Nearby are plots for cucumbers. But during the last harvest, the Israeli army suddenly closed the main checkpoint into Jericho, where she is. Boxes of her ripe cucumbers sat rotting in the sun. She's now thousands of dollars in debt.
"God help me," she says surveying her bounty.
Abudaka, the economic consultant, says in the short term, the Palestinian economy desperately needs access to work inside Israel. But in the long term, that keeps Palestinians stuck doing low-paying work, and the West Bank and Gaza need their own income-generating industries.
"Us being stuck in the middle is the name of the game," says Abudaka. "If we are much poorer, we would rebel, we would do something. If we were much richer, we would also have better dreams. And we will aim for higher."
Nuha Musleh contributed reporting from Jericho and Ramallah.
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