May 5, 2009 / 7:51 PM / 10 years ago

Israel's cash limitations threaten Gaza banks

RAMALLAH, West Bank (Reuters) - The future of banks in the Gaza Strip is bleak due to Israeli limitations on cash transfers to the territory where the black market is thriving, the Association of Banks in Palestine (ABP) said on Tuesday.

It called on international powers to pressure Israel to allow regular cash transfers to banks in the enclave to ensure their survival.

Israel tightened its blockade of the enclave in 2007 when the Hamas group seized it by force after routing Fatah forces loyal to President Mahmoud Abbas who holds sway in the Israeli-occupied West Bank.

The appeal came after ABP representatives met in Ramallah with Palestine Monetary Authority Governor Jihad Wazir and Middle East envoy Tony Blair, who has been lobbying Israel to lift restrictions on cash transfers to the Gaza Strip.

“The banks have shown their commitment to providing a service that meets international standards. We need to give them the cash to do the job so payments can be made and people aren’t pushed towards the black market,” Blair said after the meeting.

Israeli Prime Minister Benjamin Netanyahu allowed the transfer of $12 million (7.96 million pounds) to the Hamas-ruled territory last month, a quarter of the amount Abbas’s government said it needed to pay salaries.

The transfer was made from bank branches in the West Bank to bank branches in the Gaza Strip.

Abbas’s government had requested permission to transfer 200 million shekels (32.3 million pounds).

Some right-wing groups in Israel, including coalition partners in Netanyahu’s right-leaning government, oppose the cash transfers, asserting that Gaza’s Hamas Islamist rulers could benefit.

Palestinian officials in the West Bank say that assertion is unfounded, citing the use of safeguards such as direct deposit to prevent the money from going into unauthorised accounts.

Blair, the World Bank and the International Monetary Fund have been pressuring Israel for months to lift its restrictions on cash transfers to the Gaza Strip.

They argue that Israel was undermining the Palestinian banking sector, making it harder for Gazans to cover basic needs and undermining Abbas’s standing in Hamas’s stronghold.

Since the end of Israel’s 22-day Gaza offensive in January, Hamas, which receives support from Iran, has paid salaries to its own workers.

But the Western-backed government of Prime Minister Salam Fayyad, which is based in the West Bank, has struggled to do so because of the shortage of currency in the territory.

Reporting by Adam Entous; Writing by Joseph Nasr

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