The Gaza Strip’s economy is currently grappling with a severe and multifaceted cash crisis, a critical bottleneck that has brought daily commerce to a near standstill. With traditional banking infrastructure largely inoperable, the population has been forced to rely on an unregulated network of cash brokers, whose exorbitant commissions are effectively eroding household purchasing power and intensifying an already dire humanitarian situation. This unique economic collapse underscores the profound challenges of managing liquidity in a conflict zone where formal financial systems have disintegrated.
- Gaza’s formal banking infrastructure, including branches and ATMs, is largely inoperable.
- An informal network of cash brokers has emerged, charging commissions that have soared to approximately 40%.
- Inflation in Gaza surged by 230% in 2024, with unemployment reaching 80% by the end of the same year.
- No new shipments of Israeli shekels have entered Gaza for over 21 months, leading to currency deterioration.
- An attempted digital payment system, Iburaq, failed to alleviate the crisis as merchants continued to demand cash.
The Disintegration of Formal Banking and the Rise of Informal Brokers
At the core of the problem lies the near-total incapacitation of formal banking channels, including bank branches and automated teller machines (ATMs), rendering traditional financial transactions impossible. In this void, an informal system dominated by cash brokers has emerged as the primary, albeit highly punitive, conduit for accessing funds. Commissions on these transactions, which were around 5% at the outset of the conflict, have skyrocketed to approximately 40%. This extraordinary charge means that individuals seeking to withdraw funds electronically receive only a fraction of their original deposit in physical currency, severely limiting their ability to acquire essential goods and services.
Economic Devastation and Hyperinflation
The economic fallout from this cash crunch is profound and far-reaching. According to the World Bank, inflation in Gaza surged by an alarming 230% in 2024, while unemployment reached 80% by the end of the same year, a figure likely higher now. This combination of hyperinflation and mass unemployment, compounded by dwindling savings, has placed immense financial pressure on families. Many households have resorted to selling personal possessions, including gold and other valuables, simply to afford basic necessities like flour and sugar, which have seen their prices escalate exponentially. For instance, the cost of sugar has reportedly increased from less than $2 per kilogram before the conflict to between $80 and $100 per kilogram.
Drivers of the Liquidity Shortage
Several interconnected factors underpin this severe liquidity shortage. At the onset of the conflict, Israel ceased allowing new cash shipments into Gaza, a measure intended to curtail the financial capabilities of groups like Hamas. Simultaneously, a significant outflow of capital occurred as affluent families withdrew their deposits and fled the territory. Furthermore, rising concerns about Gaza’s financial stability prompted foreign suppliers, critical for importing goods, to demand immediate cash payments, further depleting the available physical currency within the enclave.
The Deteriorating State of Physical Currency
Compounding the scarcity is the deteriorating physical condition of the currency itself. Palestinians predominantly use the Israeli shekel for transactions. However, with no fresh supply of banknotes entering the territory over 21 months of conflict, the existing currency stock has become heavily frayed and damaged. Merchants are increasingly reluctant to accept these worn bills, as their own suppliers demand pristine notes. This situation has even led to the emergence of an informal “money repair” service, where individuals pay a fee to mend old banknotes, though even repaired currency is frequently rejected.
An Unregulated and Opaque Financial Landscape
The environment is largely unregulated, leaving citizens vulnerable to the arbitrary power of cash brokers. Experts like Dalia Alazzeh from the University of the West of Scotland note the impossibility of physically monitoring market prices or exchange rates under current conditions. An attempt by the Palestine Monetary Authority, Gaza and the West Bank’s de facto central bank, to introduce a digital payment system called Iburaq, attracted half a million users according to the World Bank, but ultimately failed to alleviate the crisis because merchants continued to insist on cash payments. The opacity of the current financial landscape makes it challenging to determine who truly benefits from these activities, with Omar Shabaan, director of Palthink for Strategic Studies, describing the situation as akin to a “mafia,” where deep-pocketed traders likely control both cash brokerages and the supply of basic foodstuffs, profiting from the imposed commissions.
Humanitarian Dependency and the Path Forward
Ultimately, as families exhaust their limited financial resources and the informal cash market remains prohibitively expensive, an increasing segment of the population is forced to turn to humanitarian aid. This critical shift underscores the catastrophic economic breakdown, where a lack of accessible cash transitions from a financial inconvenience to a direct determinant of survival, highlighting the urgent need for a viable and regulated financial mechanism within the Strip.
David Thompson earned his MBA from the Wharton School and spent five years managing multi-million-dollar portfolios at a leading asset management firm. He now applies that hands-on investment expertise to his writing, offering practical strategies on portfolio diversification, risk management, and long-term wealth building.