Palestinian Economy in 2025: 59% of Foreign Debtor Assets Comprised of Currencies and Deposits

Palestinian Investments Show $8.614 Million Net Balance in Q2 2025

Ramallah – Preliminary findings released by The Central Office of Palestinian Statistics and The Palestinian Monetary Authority indicate a net balance of $8.614 million in international investments for Palestine as of the end of the second quarter of 2025. The figures highlight the continuing disparity between Palestinian assets held abroad and foreign investments within the Palestinian economy.

Investment Landscape: Assets abroad

The total value of Palestinian economic assets invested internationally reached $15.058 million during the reported period. A notable portion,approximately 75%,is comprised of currencies and deposits,a consequence of the absence of a nationally recognized Palestinian currency. Direct foreign investments account for 2%, while portfolio investments represent 14%, and reserves constitute 9% of the total.

Notably, claims against Israel originating from compensation funds experienced a substantial increase of around 23% when compared to the preceding quarter.

Foreign Liabilities: Investments in Palestine

Conversely, the value of foreign liabilities – investments made by non-residents within the Palestinian economy – totaled approximately $6.444 million. Foreign direct investments dominate this category, representing 57% of the total. Thes investments are primarily channeled through banks, insurance companies, telecommunications firms with non-resident ownership, and properties owned by families residing outside of Palestine, valued at $803.6 million. Portfolio investments account for a mere 1%, while other investments, notably loans and deposits from abroad, make up around 33%.

Stable Public External Debt

The balance of Palestine’s public external debt has remained relatively stable, holding steady at approximately $1.3 billion by the end of the second quarter of 2025. The overall external debt across all Palestinian economic sectors reached around $2.118 million,marking a slight increase of less than 1% from the previous quarter.

Public sector debt accounts for the largest share, at 64%, owed to Arab and international financial institutions like the Al-Aqsa Fund, the Qatarian National Bank, and the World Bank. The banking sector represents 33% of the total, mainly consisting of deposits from non-residents held in Palestinian banks. Other sectors, including non-banking financial companies, account for a smaller fraction, with less than 1% attributed to loans between affiliated subsidiaries.

Investment Type	Percentage of Total Assets (Q2 2025)	Percentage of Total Liabilities (Q2 2025)
Direct Investment	2%	57%
Portfolio Investment	14%	1%
Other Investments	75%	33%
Reserves	9%	–

Did You Know? The investment position system categorizes assets and liabilities according to the International Monetary Fund’s Balance of Payments guidelines, distinguishing between direct, portfolio, and other investment types.

Pro Tip: Understanding the composition of international investments is crucial for policymakers aiming to foster economic stability and attract further foreign capital.

These statistics provide a vital snapshot of the Palestinian economy’s external financial relations,offering insight into its vulnerabilities and opportunities.What impact will these investment trends have on future economic policies in Palestine? How might fluctuations in international financial markets further affect these figures in the coming quarters?

Understanding International Investment Positions

An international investment position (IIP) is a fundamental economic indicator that reveals the value of a country’s external financial assets relative to its external liabilities. A positive net IIP suggests a country is a net creditor to the rest of the world, while a negative one indicates it is a net debtor.Analyzing IIP data can help identify potential risks and opportunities for economic growth. The International Monetary Fund (IMF) provides extensive resources on understanding and interpreting IIP statistics.

Frequently Asked Questions about Palestinian Investments

• What is an international investment position? An international investment position represents the value of a country’s external financial assets minus its external liabilities.
• What does a negative international investment position indicate? A negative international investment position signifies that a country owes more to the rest of the world than the rest of the world owes to it, making it a net debtor.
• What are the main components of Palestine’s external debt? Palestine’s external debt primarily consists of public sector debt owed to international financial institutions, banking sector deposits from non-residents, and obligations from other sectors.
• Why are currencies and deposits such a large part of Palestinian assets abroad? The high proportion of currencies and deposits reflects the absence of a nationally recognized Palestinian currency, leading to reliance on foreign currencies for investment purposes.
• How often is this investment data updated? This data is published as preliminary results at the end of each quarter, offering a regular overview of the Palestinian economy’s international investment situation.

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What are the primary factors contributing to the high concentration of Palestinian foreign debtor assets in currencies and deposits as of late 2025?

The Composition of Palestinian Foreign Debt in 2025

As of late 2025, the Palestinian economy presents a unique financial landscape, heavily influenced by political and economic constraints. A notable characteristic of its external financial position is the composition of foreign debtor assets. Current data indicates that approximately 59% of these assets are held in the form of currencies and deposits. This concentration has profound implications for economic stability, investment potential, and the overall financial health of the Palestinian territories. Understanding this dynamic is crucial for investors, policymakers, and anyone interested in the future of the region’s economic advancement.This article delves into the specifics of this asset allocation, its drivers, and the challenges and opportunities it presents.

Understanding the Dominance of Currencies and Deposits

The high percentage of foreign debtor assets held as currencies and deposits isn’t accidental. Several factors contribute to this trend:

* Limited Investment Opportunities: The ongoing political instability and restrictions on movement and trade severely limit viable long-term investment opportunities within the Palestinian territories. This discourages diversification into assets like bonds or equities.

* Risk Aversion: Both public and private sector entities demonstrate a high degree of risk aversion due to the unpredictable political climate. Holding liquid assets like currencies and deposits is perceived as a safer option.

* Transaction Demand: A considerable portion of these holdings represents transaction demand – funds needed for daily operations, import payments, and essential services.

* Remittance Flows: Significant remittance inflows from Palestinians living abroad contribute to the accumulation of deposits.These remittances frequently enough remain in liquid form for immediate use or short-term savings.

* Banking Sector Structure: The palestinian banking sector, while relatively stable, is comparatively small and lacks the sophistication to facilitate complex investment products.

Breakdown of Currency and Deposit Holdings

The 59% figure encompasses a variety of currencies and deposit types. Here’s a more detailed breakdown:

* US Dollar (USD): The dominant currency held, accounting for approximately 70-80% of the total currency holdings. The USD is favored for its stability and widespread acceptance in international trade.

* Jordanian Dinar (JOD): Historically, the JOD has been a significant holding due to close economic ties with Jordan. Its share has been gradually decreasing but remains substantial.

* Israeli Shekel (ILS): the ILS represents a growing portion of currency holdings, reflecting increased economic interaction with Israel, despite the political complexities.

* Euro (EUR): A smaller, but increasing, share of currency holdings, driven by trade with European nations and diversification efforts.

* Demand Deposits: The largest component of the deposit holdings, providing immediate liquidity.

* Time Deposits: A smaller portion, offering slightly higher interest rates but with limited liquidity.

Implications for the Palestinian Economy

This asset composition has several key implications:

* reduced Economic Growth: The concentration of assets in low-yielding currencies and deposits hinders economic growth. Funds are not being deployed into productive investments that could generate higher returns and create jobs.

* Vulnerability to External Shocks: While seemingly safe, holding large amounts of foreign currency exposes the Palestinian economy to exchange rate fluctuations and potential devaluation.

* Limited Financial Sector Development: The lack of demand for more elegant financial products stifles the development of the Palestinian financial sector.

* Dependence on Aid: The limited investment capacity reinforces the Palestinian economy’s dependence on international aid and remittances.

* Inflationary Pressures: While not currently a major issue, a significant influx of foreign currency without corresponding increases in productivity can contribute to inflationary pressures.

Challenges and Opportunities: Navigating the Financial Landscape

Several challenges need to be addressed to shift this asset allocation and foster enduring economic growth:

* Political instability: Resolving the ongoing political conflict is paramount. A stable political environment is essential to attract foreign investment and encourage domestic entrepreneurship.

* Restrictions on Movement and Trade: Easing restrictions on the movement of goods and peopel is crucial to facilitate trade and investment.

* Strengthening the Financial Sector: Developing a more sophisticated financial sector capable of offering a wider range of investment products is essential.

* Promoting Investment: Creating a more favorable investment climate through regulatory reforms and incentives can attract both domestic and foreign capital.

* Diversifying the Economy: Reducing reliance on aid and remittances by diversifying the economy into sectors with higher growth potential is vital.

Despite these challenges,opportunities exist:

* Developing the Tourism Sector: The Palestinian territories possess significant tourism potential,particularly in past and religious sites.

* Investing in Renewable Energy: the region has abundant solar energy resources, offering opportunities for investment in renewable energy projects.

* Promoting small and Medium-Sized enterprises (SMEs): Supporting SMEs can create jobs and stimulate economic growth.

* Leveraging Technology: Investing in technology and digital infrastructure can improve efficiency and competitiveness.

Case Study: The Impact of Remittance Flows on Deposit Levels (2020-2025)

Between 2020 and 2025, remittance inflows to the Palestinian territories experienced fluctuations due to global economic conditions and the COVID-19 pandemic. though, overall remittances remained a significant source of income. Data from the Palestinian Monetary Authority (P