When cash isn't king

The Star

3 days ago

CASH is the lifeblood of Gaza's shattered economy – and, like food, fuel and medicine, it is in desperately short supply.
With nearly every bank branch and ATM inoperable, residents have become reliant on a growing network of powerful, unregulated cash brokers. Their commissions have soared to as much as 40%.
'The people are crying blood because of this,' said Ayman al-Dahdouh, a school director in Gaza City. 'It's suffocating us, starving us.'
In a territory reeling from inflation, unemployment and dwindling savings, the cash crunch has made daily survival even more precarious.
Some families are selling off possessions just to afford essentials like flour and sugar.
And even the available cash is losing value – not in exchange rate, but in physical condition.
Most Palestinians in Gaza use the Israeli shekel, but Israel is no longer sending in newly printed notes. Merchants increasingly reject frayed or damaged bills.
Israel banned cash deliveries into Gaza early in the war in a bid to weaken Hamas.
Around the same time, many wealthy families fled the enclave, emptying their accounts.
A Palestinian man repairing worn-out Israeli currency. — AP
Meanwhile, foreign businesses began demanding cash up front for goods, fearing Gaza's financial instability.
As the money supply shrank, cash brokers – once charging a modest 5% – began demanding far more.
Today, transferring the equivalent of US$100 might get you only US$60 in hand.
'If I need US$60, I have to transfer US$100,' said Mohammed Basheer al-Farra, who was displaced from Khan Yunis.
'We lose nearly half our money just to be able to spend it.'
Brokers operate in the open, advertising services in shops and online. Some grocers and retailers also moonlight as informal money changers.
The system is rife with desperation and abuse.
'People are at their mercy,' said Mahmoud Aqel, a displaced resident of southern Gaza. 'No one can stop them.'
Inflation in Gaza surged 230% in 2024, according to the World Bank.
After a brief dip during a ceasefire in January, it rose again when the truce collapsed in March.
By year's end, about 80% of the population was unemployed – a number likely even higher now. Most of the few who do work are paid by direct deposit, but that means little in a cash-only economy.
'When you want to buy vegetables, food, water, medication – if you want to take transportation, or need a blanket – you must use cash,' said al-Dahdouh.
Shahid Ajjour's family has survived on savings since the war destroyed their pharmacy and other businesses.
She sold her gold jewellery to buy basic goods. The family of eight now spends US$12 every two days on flour – triple the pre-war cost.
Sugar, once US$2 a kilogramme, now costs up to US$100, several people said. Petrol sells for around US$25 per litre.
Broken Arab Bank ATMs in Gaza City. — AP
After 21 months of war, Gaza's banknotes are literally falling apart.
'Money is so fragile, it feels like it's going to melt in your hands,' said Mohammed al-Awini, who lives in a tent camp in southern Gaza.
Small business owners are under pressure to accept only crisp, undamaged bills – because their suppliers demand the same.
Thaeir Suhwayl, a flour merchant in Deir al-Balah, said his suppliers insist on brand-new 200-shekel notes (around US$60), which are rare. Civilians usually hand him ragged 20-shekel notes (about US$6).
On a recent trip to the market, Ajjour transferred US$100 to a broker and received about US$50. But the merchant refused the worn bills.
'So the worth of your US$50 is zero in the end,' she said.
The shortage of acceptable currency has sparked a strange new business: banknote repair.
In Gaza, it now costs between 3 and 10 shekels (US$1–US$3) to patch up a tattered bill. But even taped-up notes are often rejected.
To ease the crisis, the Palestine Monetary Authority introduced a digital payment system, Iburaq, in 2023. It attracted about half a million users – roughly a quarter of the population – but most merchants refuse digital payment, insisting on cash.
Efforts to regulate prices or exchange rates have collapsed.
'Nobody can physically monitor what's happening,' said Dalia Alazzeh, a finance expert at the University of the West of Scotland.
Israel has meanwhile tightened restrictions on humanitarian aid, citing claims that Hamas siphons off goods to resell.
It's unclear if the cash broker system directly benefits Hamas, said Omar Shabaan, director of Palthink for Strategic Studies, a Gaza-based think tank.
'It's a dark place now. You don't know who is bringing cigarettes into Gaza. It's like a mafia.'
The same deep-pocketed traders who bring in goods may also be running the cash operations and raking in commission.
'They benefit by imposing these commissions,' he said.
For many, the only remaining option is humanitarian aid.
'This is the only way I can feed my family,' said al-Farra, who now visits food distribution centres, where crowds jostle for sacks of flour and boxes of pasta.
Once, his family paid for everything in cash. Now, the worth of that cash is shrinking – or unusable. — AP