Economy|Israel-Palestine conflictWhen money is scarce, every choice counts: Bank, cash, or credit?Severe cash shortage in Gaza adds hardship to people’s daily lives.

Residents of Gaza City are encountering significant financial challenges due to a severe cash flow problem. With limited access to physical cash, many are turning to alternative payment methods.

The Palestinian Monetary Authority, in collaboration with internet service providers, has promoted mobile-based electronic payments such as PalPay and Jawwal Pay. This initiative aims to mitigate the shortage of Israeli shekel banknotes, which has been exacerbated by the destruction of approximately 90% of bank branches and cash machines.

Despite these efforts, electronic payments introduce additional challenges for a large portion of the population. Many individuals lack access to smartphones or struggle with maintaining a charge on their devices due to ongoing electricity issues. Furthermore, reliable internet connectivity remains a barrier to executing these transactions smoothly.

The economic situation in Gaza has evolved from a liquidity crisis to a broader structural problem. The informal economy is increasingly prevalent, driven by scarcity and political constraints. The black market now plays a significant role in determining liquidity conditions, with high-commission cashing operations becoming more common.

According to Ahmed Abu Qamar, a member of the Palestinian Economists Association, the formal monetary system has been sidelined. The transition to electronic payments has created severe economic and social distortions, with widespread credit sales indicating declining incomes and reduced purchasing power.

Local businesses, such as street grocery stalls, are adapting by accepting both electronic payments and worn-out banknotes. However, this has led to increased unpaid debts and challenges in maintaining operations. Profits have been affected, and the necessity to offer goods on credit has become more common.

The economic conditions have also paved the way for middlemen to exploit the situation by imposing high commissions on cash exchanges. This practice contributes to the financial strain faced by many residents.

Overall, the financial landscape in Gaza remains precarious, with both businesses and households navigating a complex system of cash shortages and electronic payments amidst ongoing economic and infrastructural challenges.

Based on reporting by Al Jazeera.