Hamas faces financial crisis after three-year Israeli blockade

Laboring under an Israel blockade supported by Egypt, Hamas hasn't paid government employees full salaries for two months. It's also had to raise taxes, an unpopular move in the impoverished Gaza Strip.

By , Correspondents

  • close
    A Palestinian woman is reflected in the window of a money-changer’s shop in Gaza City, where financial crisis has gripped the Hamas government. A major Arab bank has announced it will close its branches there.
    View Caption

Hamas has failed to pay in full the monthly salaries of its roughly 30,000 civilian and security employees in the past two months, signaling that the Islamist organization may be in the throes of its first financial crisis since it seized control of Gaza in 2007.

"The government is facing a crisis," said Hamas lawmaker Jamal Nassar last month. "The siege on the [Hamas-run] Palestinian government has been tightened recently and because of this it has been unable to bring in funds from abroad."

In response, Gaza's Hamas-run government has imposed new taxes in recent weeks. Cigarette packs cost a dollar more than they did last month, and the price of fuel is up 3 percent. Building materials are in short supply under an Israeli-Egyptian blockade, and scavengers now pay hefty fines even on the rubble they salvage.

Recommended: Could you pass a US citizenship test?

IN PICTURES: The Israeli separation barrier: A West Bank wall

The duties have sown popular discontent across an already impoverished Gaza.

"I run my generator because the electricity is cut, and I cannot do business," says Ahmed, a shop owner who was taxed for putting his generator on the street outside his store.

"Why is the electricity cut?" he asks. "Because Hamas is in power, and the borders are closed. So now, Hamas, you will charge me for my steadfastness under your siege?"

Such sentiments are widely shared in Gaza, where unemployment stands at roughly 40 percent, and 4 in 5 residents are dependent on food aid.

Since coming to power in 2006 elections, Hamas had until now maintained a steady cash flow. It profited from the smuggling of black-market goods through tunnels under the Gazan-Egyptian border – tunnels also used to bring in suitcases of foreign currency. It has also transferred funds through money-changers outside Gaza, but controls have tightened.

"The Egyptian authorities have recently been monitoring and cracking down on financial transactions between Egypt and Gaza, through money-changers and other avenues," says Gaza-based political analyst Mkhaimar Abusaada.

In addition, on May 10 Arab Bank – a major international firm – said it was closing its three Gaza branches, severing one of the last financial lifelines from the outside world.

Hamas needs approximately $16 million monthly for salaries, says Deputy Finance Minister Ismail Mahfouz.

The Fatah-controlled Palestinian Authority in the West Bank foots the bill for most of the government services in Gaza. But Hamas is believed to also be financed by Syria, Iran, and Islamic charities abroad, with just 10 percent of revenue generated locally.

Gazans may think twice before protesting the taxes because of Hamas's tight hold on power. "The people in Gaza know what it means to be arrested and persecuted by Hamas," says Mr. Abusaada.

IN PICTURES: The Israeli separation barrier: A West Bank wall

Related:

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...