Prime Minister Mohammad Mustafa Denounces Year-Long Tax Freeze as Palestinian Authority Faces Institutional Collapse

PM Mohammad Mustafa says the PA is "cash-strapped" and facing collapse after a year without tax transfers from Israel, affecting 60% of its budget.

By: AXL Media

Published: Apr 27, 2026, 1:07 PM EDT

Source: Information for this report was sourced from Times of Israel

The Anatomy of a Financial Stranglehold

The Palestinian Authority (PA) is currently navigating the most severe financial crisis in its history, following a definitive statement by Prime Minister Mohammad Mustafa regarding the total cessation of tax revenue transfers from Israel. Speaking at a press conference on April 26, 2026, Mustafa asserted that "not a single shekel" has been transferred to the PA’s coffers over the last 12 months. These funds, collected by Israel on behalf of the PA under the framework of the Oslo Accords, consist of customs duties on goods destined for the Palestinian territories. Because these revenues constitute the vast majority of the PA's operating budget, their absence has paralyzed the civil service and placed the government on the brink of total insolvency.

Drastic Cuts to Public Sector Salaries

The human cost of the revenue freeze became strikingly apparent following a recent announcement from the Palestinian Finance Ministry. Officials stated that due to what they termed the "theft" of tax revenues, all public sector employees would receive a flat payment of only NIS 2,000 for their January salaries—which were already distributed with a significant delay. This follows a year of increasingly irregular payments that have left thousands of families in a state of economic precariousness. Mustafa emphasized that the suffering is widespread, impacting not only the employees themselves but the entire local economy, which relies heavily on the purchasing power of the government’s massive workforce.

Smotrich Confirms Policy of Total Withholding

In a direct response to the PA’s claims, Israeli Finance Minister Bezalel Smotrich confirmed that he has withheld this month’s clearance revenues, totaling NIS 740 million. Smotrich maintained that this is a continuation of a year-long policy aimed at penalizing the Palestinian Authority for its activities in international legal and diplomatic arenas. The Israeli Finance Ministry justified the freeze by citing the PA’s support for anti-Israel initiatives at the International Criminal Court and its continued payments to the families of prisoners and attackers. By freezing the "clearance" funds, the Israeli government is utilizing its control over Palestinian trade as a primary tool of political and security leverage.