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Withdrawing Without Depositing: Financial Liquidity Shortages in Gaza Increase Exchangers’ Exploitation

Mostafa Al-Dahdouh
Palestinian Journalist
Published on 18.04.2024
Reading time: 7 minutes

The fate of Gazans has led them to wonder in outrage, why are they being exploited in the current circumstances they are living in? It’s as if there is no escape from death except through death, surviving bombardment only to die of hunger.

“The exchange commission and the withdrawal of financial transfers have increased because there is no liquidity.”

A number of financial exchange shop owners in Gaza have used the aforementioned justification, while others have recently delved into the world of financial transfers and exchange during the war that broke out on October 7, 2023, drastically changing the reality inside the Gaza Strip. As usual, the citizen remains the first and last victim on all fronts. 

Today, six months after the brutal war began on Gaza, the average citizen pays the price for everything throughout, from high prices to exploitation and deceit. Meanwhile, the owners of exchange shops and money transfers have turned into some of the fiercest predators, devouring the livelihood of citizens by imposing insane interest rates on financial transfers coming from expatriates to their relatives inside the sector.

Gazans are currently living a war within a war to earn their living, not only from the occupation but also from his own people and his country, who exploit his urgent need for money.

Collecting and securing money between families and acquaintances is one of the most important ways Palestinians have resorted to in order to transfer money to their relatives in northern Gaza, as the ability to transfer money through traditional channels is not available. Additionally, expatriate Palestinians are trying to help their families in the sector by sending them financial transfers. However, several difficulties hinder the process of sending and receiving money.

Even though money transfer operations were carried out through money transfer companies and banks, expatriates currently send financial amounts through individuals working in the field of transfers, with the money sometimes taking days or weeks to reach their recipients.

A Losing Game for Senders and Receivers 

Maisara Qadih, a 42-year-old Palestinian, works as an engineer in a European country, trying to support his family, most of whom are in Gaza, by sending financial transfers to a currency exchange office in Gaza to be delivered to his family members.

Qadih recounted the transfer process to Daraj, saying that during the first month of the war, the process was smooth, as the transfer would be sent and received through one of the internationally recognized systems. However, those systems were soon stopped, and tangible exploitation began as money was being transferred through “digital currency wallet” systems, where the exchange shop owner would deduct a five percent commission fee from the transferred amount.

Qadih explained that things have become very complicated, adding: “I am afraid of not being able to ensure that the money reaches my family as soon as possible, especially with the exchange shops manipulating the exchange rate of foreign currencies and delivering them in the shekel currency used in Palestine, causing a loss of at least 3 to 5 dollars per 100 dollars  due to the exchange rate.”

Both the sender and the receiver bear a margin of loss from the total monetary amount due to this deduction and the unavailability of dollars in Gaza, not to mention the differences in the exchange rate upon delivery in shekels. Delivery in the central areas, as well as Rafah and Khan Yunis is somewhat easier than delivery in the north and Gaza City due to the difficulty of movement within them.

In normal circumstances before the Israeli war, Gaza had many exchange shops that provided transfer services such as Western Union and MoneyGram, as well as several authorized money transfer companies. International transfers to the sector used to take about 24 hours through these methods, where the recipient would present a specific transfer number to receive the transferred amount.

However, these procedures, which were relatively easy for both parties, have become complicated today due to the blockade on bank movement and money transfers, continued bombardment, infrastructure destruction, absence of personal documents, the blockade, and displacement. Palestinians now rarely use conventional money transfer methods due to the emergence of individuals working in digital currencies and wallets in both the receiving and delivery processes.

Haitham Salman, a young man, says he is working hard to collect money through supporters to transfer it to his brother in Gaza. An attempt by Salman and a number of people outside of Palestine to stand with their people, they have been raising this money to prepare emergency food baskets for the displaced and provide citizens with  small amounts of money to meet their daily needs amid the high cost they are experiencing.

Salman told Daraj about his struggles with exchange shops and transfer operations, saying: “At first, I was surprised that the exchange shops get a 5 percent commission from the transferred amount to the sector, knowing that usually the cost of the transfer process is deducted from the country where the money is sent from, not the country it is sent to.”

“In the last two months, especially during Ramadan, a sum of $8000 was collected to buy cattle for slaughter, to be distributed to the displaced. I was shocked by the increase in the exchange shop’s deduction rate, which reached 15 percent,” he added, which resulted in a loss of $900 from the transferred amount after the operation, including the cash withdrawal commission and the difference between the dollar’s official exchange rate and the black market rate.

Several journalists and workers during the war have explained that they are struggling to obtain their rights due to losing a large amount of money from their salaries and dues as a result of the exploitation of the existing situation: most exchange shops are manipulating the exchange rate of foreign currencies, forcing journalists & workers to search for the best rate to minimize the inevitable loss.

Attempts to Justify

Daraj tried obtaining responses from exchange shop owners, and only one exchange shop owner in the central governorate of Deir al-Balah, who refused to mention his name, explained their work method and some ongoing details in the process, saying: “Cash is provided through traders who stipulate selling liquidity they hold for a financial percentage of 5 percent interest on the amount’s purchasing value, which prompted us to increase the interest rate collected from citizens.”

He added that the interest deducted is not fixed and varies from one exchange shop to another, ranging from 12 to 25 percent, and citizens have no alternative but to submit to the reality, as [the exchange shops] work for profit. Due to the increase in withdrawal rates during Ramadan from citizens and traders, and as the banking system is unable to meet the need for liquidity, the financial cycle remains incomplete, and “withdrawal is done without deposit.”

An Incomplete Economic Cycle

The Financial Times reported that Palestinian bankers carried out a complex operation in the northern Gaza Strip, during which more than 900,000 cash notes were rescued from the rubble of Palestine Bank branches. They were transferred  via a convoy transporting the cash notes, valued at about 180 million shekels in cash ($50 million). Thus, they became available for circulation in the southern part of the sector.

The commercial life cycle in the Gaza Strip is estimated at around $3 billion annually, divided over the days of the year. According to unofficial estimates, this makes the direct financial losses of the ongoing aggression not less than $10 million daily, without counting the damages and missed opportunities.

According to estimates from civil society institutions in the sector, the poverty rate before the war was 64 percent, which is twice as much as in the West Bank. Additionally, 33.8 percent of the population lives below the poverty line, while 57 percent of Palestinian families suffer from food insecurity, which is approximately 6 out of every 10 families in the sector.

In his  speech at the Non-Aligned Movement summit held in the Ugandan capital, Kampala, on January 20, UN Secretary-General Antonio Guterres said that people in the Gaza Strip are not dying just because of bombs and bullets, but also due to the lack of food and clean water, power cuts, medicine shortages in hospitals, and the arduous journeys to small pieces of land to escape the fighting.

The United Nations Office for the Coordination of Humanitarian Affairs stated that the Israeli army’s blocking of access to areas located north of the Gaza Valley hinders efforts to increase the provision of life-saving assistance there.

The economic sector in Gaza is also suffering from an “economic shock,” according to a joint statement issued by the Palestinian Central Bureau of Statistics and the Palestinian Monetary Authority on January 2 of this year. Meanwhile, the gross domestic product in Gaza witnessed a sharp contraction during the fourth quarter of 2023, exceeding 80 percent, accompanied by a sharp rise in unemployment rates in the sector, exceeding 74 percent during the fourth quarter of 2023, after it was 45 percent in the third quarter of 2023.

Total consumption decreased by 33.1 percent (21 percent in the West Bank and 80 percent in Gaza) during the fourth quarter of 2023 compared to the same period last year. Private consumption by households and non-profit institutions serving households witnessed a 33 percent decrease, while public (government) consumption decreased by 33.4 percent during the same period.

The fate of Gazans has led them to wonder in outrage, why are they being exploited in the current circumstances they are living in? It’s as if there is no escape from death except through death, surviving bombardment only to die of hunger.