West Bank and Gaza

The World Bank began its program of assistance in the Palestinian territories in November 1992. Grants financed by the World Bank’s own resources, complemented by co-financing from development partners, have supported projects led by the Palestinian Authority’s (PA) in water, energy, urban and local development, public financial management, social protection, education, health, solid waste management, digital development, the financial sector, and private sector development.

The conflict in Gaza has resulted in a large number of casualties as well as widespread displacement and destruction of infrastructure in Gaza as well as significant knock-on effects in the West Bank. This has led to a sharp reduction in economic output and a collapse of basic services in both the West Bank and Gaza amid deepening poverty across the territories.

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Following two years of intense conflict, a ceasefire has been in place in Gaza since October 2025; however, a sustainable recovery has yet to begin. After the historic contraction of 2024, economic activity in 2025 expanded in both Gaza and the West Bank, though for markedly different reasons. In Gaza, real GDP rose by more than 30 percent reflecting a statistical ‘low base effect’ following the 83 percent contraction in 2024, rather than a meaningful recovery. While embryonic normalization is developing under the ceasefire, persistent kinetic activity, volatility and destruction have left most productive sectors largely paralyzed, with only minimal activity observed in trade and a narrow set of public services. The latest Rapid Damage and Needs Assessment by the World Bank, United Nations, and European Union estimates total recovery and reconstruction needs in Gaza at approximately US$71.5 billion, highlighting the unprecedented scale of destruction. The West Bank economy grew by around 3 percent in 2025, driven by marginal recovery in private consumption as Palestinian workers’ access to the Israeli labor market was restored to a modest degree.

Labor market conditions remain deeply distressed across both Gaza and the West Bank. In Gaza, unemployment reached an unprecedented rate of 78 percent in 2025, a nearly fourfold increase from already significant pre-conflict levels. In the West Bank, unemployment moderated to 28 percent in 2025 from its 35 percent peak at the conflict’s onset, supported by incremental labor access of Palestinians to Israel and marginal ensuing gains in consumer spending power.

The PA faced one of its most dire fiscal crises in 2025, after Israel completely suspended clearance revenue transfers in May. With declining domestic revenues and insufficient external aid, the PA further cut public salary payments to 50-60 percent in late 2025. To manage the deficit, the PA expanded domestic bank borrowing beyond prudential limits and continued accumulating arrears to public employees, the private sector, and the pension fund—further straining the domestic financial system.

The Palestinian banking system faces mounting stress despite the appearance of stable financial indicators. Rising liquidity pressures are eroding key financial sector functions. The PA’s growing domestic borrowing—$3.3 billion as of December 2025—is compounding existing risks. The depletion of digital NIS in correspondent accounts and excess shekel cash create a liquidity trap with potentially destabilizing effects in the short-term, if gone unaddressed. Without sustainable solutions, banks may soon be unable to support essential imports, underscoring the urgent need for a lasting cross-border payments framework..

Ad Hoc Liaison Committee Monitoring Reports

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The October 2023 conflict prompted a reallocation of resources in Gaza. Regular development operations in Gaza had to be paused, and $44 million was mobilized for emergency health, water, and food support including psychosocial assistance and learning-loss interventions for children, through UN agencies (WHO, UNICEF, UNDP, and WFP).

Since the onset of the conflict, the World Bank has mobilized approximately $590 million in financing to help the PA manage its fiscal crisis and maintain education and health services in the West Bank, including $28.8 million from donor partners—UK, France, and Japan—through the Palestinian Fund for Reconstruction and Development (PFRD).

In August 2024 and again in September 2025, the Board of Executive Directors approved a $300 million replenishment for the Trust Fund for Gaza and the West Bank, with programs targeting fiscal stabilization, reforms and critical service delivery as well as medium-term development in the West Bank. The funds are split between fiscal support and investment projects, expanding efforts in healthcare, energy, solid waste management, education, social protection, real estate registration, and SMEs.

The World Bank, in collaboration with the UN and the EU, produced the Gaza & West Bank Interim Rapid Damage and Needs Assessment (IRDNA), estimating Gaza’s reconstruction and recovery needs at $53 billion. The assessment informs the Gaza Recovery Framework with a three-year reconstruction roadmap at scale as soon as the situation allows. The PA has drawn on this work for its own Gaza Recovery, Reconstruction & Development Plan.

FY25 World Bank’s allocations from $300 million replenishment:

• The Integrated Solid Waste Management ($20M TFGWB and $5M PID MDTF)
• Palestinian Emergency Financing Facility I, II, III ($167M)
• Supporting an Education Reform Agenda -SERATAC Phase 2 ($20M)
• Health System Reform: $20M
• Social Recovery & Job Creation: $40M
• Energy Sector (ASPIRE 3): $20M TFGWB and $5M PID MDTF
• Social Protection Enhancement Project Phase 2: $20M

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The World Bank works with development partners to maximize donor financing through coordination and trusted platforms—such as well-established trust funds.

The Palestinian Fund for Reconstruction and Development (PFRD), established by the World Bank in early 2025 at the PA’s request, supports sustainable recovery and reconstruction, economic recovery, and social resilience in the West Bank and Gaza. It restructures the former PURSE MDTF and manages donor resources—coordinating, prioritizing, and sequencing reconstruction, while also seeking to crowd in private funding. No operational activities or financial transfers to Gaza are foreseen at this stage. Re-engagement in Gaza would only occur if conditions allow, and is subject to prior Board endorsement. As of April 2025, the PFRD's holds $157 million, with 96% of committed. Donors include Canada, France, Japan, Norway, Switzerland and the UK.

ESPERE I and II, associated with PURSE and established in 2022 and 2023, receive EUR 18.7 million from the European Commission to support public financial management, business environment reforms, financial sector modernization, and private sector development.

The Palestinian Partnership for Infrastructure Development MDTF (PID MDTF)  provides financial and technical support for energy, water, and urban development. Since its launch in 2012, it has channeled $299 million in pledges (as of April 2025) and co-financed 18 investment operations—including eight active projects in FY25—and supports five active World Bank-executed ASAs across the sectors. PID also prioritizes cross cutting themes such as gender, climate resilience, and citizen engagement. Its nine partners include Australia, Finland, France, Iceland, Italy, the Netherlands, Norway, Sweden, and the UK.

Additional Links:

• Palestinian Fund for Reconstruction and Development (PFRD)
• Palestinian Recovery and Development Plan
• Palestinian Partnership for Infrastructure Development MDTF

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