Banks inside Gaza have been forced to shut because of a shortage of cash.
Tens of thousands of families have been left without money before a Muslim festival on Monday. Palestinian officials said Gaza's financial institutions had nearly run out of notes and coins as the result of severe Israeli curbs on the flow of goods, people and money into and out of the strip.
Already stringent restrictions were tightenedlast month, after a flare-up in violence between Israel and the Islamist Hamas group, which took over the Gaza strip last year. Palestinians in Gaza and the West Bank primarily use the Israeli currency, the shekel, and rely on transfers of notes and coins from Israel.
Other currencies, such as the US dollar and the Jordanian dinar, are also in use but are now in equally short supply in Gaza.
International organisations and senior Palestinian officials have pleaded with Israeli authorities to allow the transfer of cash into Gaza as a priority.
Jihad al-Wazir, the governor of the Palestinian Monetary Authority, warned the Bank of Israel in a letter last month that Gaza-based banks were facing "severe liquidity problems" and had seen [n]their cash reserves dwindle to 47m shekels ($12m, €9m, £8m). Gaza has a population of 1.5m people.[/b]
The letter, a copy of which has been seen by the Financial Times, warned of a "huge contagious effect to the whole banking system in Palestine" if his request for the transfer of 185m shekels were not met. The situation has since deteriorated.
Customers reportedly stormed a bank branch in Khan Younis, a town in southern Gaza, on Wednesday after it ran out of cash.
Fearing similar outbreaks of violence and in light of a lack of notes and coins, almost all banks and cash machines in Gaza have been closed since Thursday.
The cash crisis has prevented the payment of December salaries to tens of thousands of Gazans employed by the Palestinian Authority, which is based in the West Bank and regards the Hamas government in Gaza as illegitimate. Officials and workers who receive their pay from Hamas were reportedly paid on time, deepening the rift between the two groups.
The lack of cash has affected international organisations. The United Nations Relief and Works Agency, which supplies aid to one in two Gazans, was forced to suspend cash distribution to 94,000 Palestinians last week.
The problem is exacerbated by the need for Muslims to prepare for the religious festival of Eid al-Adha on Monday, a time when they spend more money on food and presents.
