The Finance Ministry has offset all electricity debts of the Palestinian Authority – 1.1 billion shekels ($310 million) – while simultaneously emptying the Norwegian fund where Palestinian Authority-destined funds had been deposited since the start of the war.
Finance Minister Bezalel Smotrich led this initiative throughout the past year and on Sunday told the Diplomatic-Security Cabinet the completion of the process – collecting the entire debt that had stood 1.9 billion shekels ($515 million) for over a decade.
Additionally, and no less significantly, the Finance Ministry on Sunday issued an order to the Norwegian fund, where Israel had deposited millions deducted from PA funds earmarked for the Gaza Strip (275 million shekels monthly or $74 million), totaling some 1.4 billion shekels accumulated until May ($379 million). This money will cover PA debts to Israeli companies: Half will go to companies that supplied fuel to the Palestinian Authority and half to the Israel Electric Corporation.
Since last May, when Norway announced its unilateral recognition of a Palestinian state, Minister Smotrich also stopped transferring the offset funds to the Norwegian fund and began accumulating the amount separately in Israel. Now, the sum that was supposedly meant to return to the PA after the war from both the fund and Israel is being transferred to cover debts to the Israel Electric Corporation in coordination with the US. The behind-the-scenes negotiations on this matter with the PA and various American entities were led by Finance Ministry deputy director-general. The latter succeeded where his predecessors failed: transferring the money in full, without reducing late payment interest, from PA funds to the Israel Electric Corporation.
The PA's debt to the Israel Electric Corporation has been an ongoing issue for Israel for 15 years. Former Finance Ministry Director-General Shai Babad reached two agreements in 2016 and 2020 with the PA to settle the rolling debt, but these were repeatedly violated by the Authority.
As we reported in September 2023, Smotrich, in his role as finance minister, began reducing the rolling debt by associating the Jerusalem District Electricity Company with the PA , thus stopping the debt from growing every two months and fixing it at 1.9 billion shekels. Since then, in July and November of last year, a total of approximately 700 million shekels were collected from the Authority.
Today, this historic collection process reached its peak and conclusion – 1.1 billion shekels will be cleared in full and the money will be transferred to the Israel Electric Corporation, partly from the Norwegian fund and partly from funds accumulated in Israel. After reaching agreements with US Ambassador Thomas Nides and preventing the use of accumulated funds in the Norwegian fund for Palestinian purposes, Norway will receive a letter requesting the funds from the Accountant General, from there to pay various debts. Despite American demands for interest rate discounts, the Finance Ministry refused to compromise even one shekel, understanding that such "discounts" are a negative incentive that no Israeli citizen receives.
A deadline was also set for the first time with the Americans: transferring the budget in Israel without indirectly rolling additional burdens onto citizens due to the debt held by the Israel Electric Corporation. The fact that the Biden administration boycotted the Israeli finance minister played in favor of the matter, as the absence of relations meant the absence of obligation to respond to their demands on Palestinian issues.
The diplomatic gain means that the Palestinian Authority was indirectly forced to pay the debt it had been rolling over year after year. This is also a significant economic event as the PA's debt to the Israel Electric Corporation led to loans and high interest rates as well as damage to the Israel Electric Corporation's credit rating, which ultimately rolled over to citizens.
