By the end of the second quarter of 2025, 59% of the Palestinian economy's total foreign asset balances consisted of cash and deposits, with total foreign assets reaching 15.058 billion US dollars. The Palestinian economy's net international investment position stood at 8.614 billion US dollars, highlighting a significant disparity between foreign assets and liabilities.
The Net International Investment Position
The Palestinian Central Bureau of Statistics and the Palestinian Monetary Authority jointly released preliminary results detailing the international investment position and foreign debt of Palestine as of the end of the second quarter of 2025 and the close of 2024. According to these findings, the total external assets of the Palestinian economy exceeded its foreign liabilities by approximately 8.614 billion US dollars. This substantial net positive position reflects the overall picture of the economy's investments outside and within Palestine.Foreign Asset Composition
As reported by the Palestinian Monetary Authority and the Palestinian Central Bureau of Statistics, the foreign asset balances of the Palestinian economy as of mid-2025 amounted to 15.058 billion US dollars. These assets were categorised as follows:- Direct foreign investment constituted 2% of the total foreign assets.
- Portfolio investments made up 14%.
- Other investments, primarily composed of cash and deposits, accounted for 75%.
- Reserve assets represented 9%.
The predominance of cash and deposits is mainly attributed to the absence of a Palestinian national currency, leading the economy to hold substantial liquid assets externally.
Foreign Liabilities Breakdown
The total foreign liabilities or obligations on the Palestinian economy stood at about 6.444 billion US dollars. The distribution of these liabilities included:- Direct foreign investment at 57%, primarily encompassing banks, insurance companies, telecommunications entities owned by non-residents, and real estate owned by non-resident families valued at 803.6 million US dollars.
- Portfolio investments represented a minimal 0.1%.
- Other investments, mainly loans and deposits from abroad, accounted for approximately 33%.
Receivables and Debt Trends
Receivables from Israel related to clearance funds witnessed an increase of roughly 23% compared to the previous quarter, reflecting a dynamic in financial flows between Palestine and Israel. Meanwhile, the external debt balance of the Palestinian government stabilised at around 1.3 billion US dollars by the second quarter of 2025.Preliminary data showed that the total external debt across Palestinian economic sectors reached approximately 2.118 billion US dollars by mid-2025, marking a less than 1% rise compared to the preceding quarter. This debt was distributed between:
- Government debt at 64%, predominantly owed to Arab and international financial institutions such as the Al-Aqsa Fund, Qatar National Bank, and the World Bank.
- The banking sector at 33%, relating largely to deposits held by non-residents in banks operating within Palestine.
- Other sectors, including non-bank financial companies, non-financial corporations, civil society institutions, and households, accounted for 2%.
- Borrowings among affiliated companies constituted less than 1%.
Understanding the Investment and Debt Classifications
The international investment position, as explained by the Palestinian Monetary Authority, captures the balance between the assets held abroad by residents of Palestine (individuals, businesses, and government) and the investments made by non-residents in Palestine. These assets and liabilities are classified under international standards outlined by the International Monetary Fund's Balance of Payments Manual (1993, fifth edition) into:- Direct investment: investments surpassing a 10% stake in non-resident entities.
- Portfolio investments: holdings less than 10% in capital and investments in bonds.
- Other investments: trade credits, loans, liquid assets like cash and deposits, and miscellaneous financial items.
- Reserve assets: monetary authority holdings used to manage the balance of payments imbalances, represented only as assets.
External debt data represents debt obligations of Palestinian economic sectors to non-residents. It includes loans, deposits of non-residents in domestic banks, Palestinian bonds owned by non-residents, and debt between related companies across borders, based on the IMF's External Debt Statistics Handbook (2003) aligned with the Balance of Payments Manual.
The financial snapshot at the end of the second quarter of 2025 portrays a Palestinian economy with substantial cash and deposit reserves abroad, a significant net positive international investment position, and a stable, yet slightly increasing, external debt profile primarily linked to government and banking sectors. These figures underscore the ongoing challenges and dynamics in managing foreign assets and liabilities within an economy lacking a fully independent monetary framework.