End to smuggling leaves Hamas with cash crisis in Gaza

Gaza’s ruling Hamas movement is facing a serious financial crisis following Egypt’s military-backed government’s crackdown on the smuggling tunnels that move goods and people between northern Sinai and the Gaza Strip.

Because of a sharp drop in the tax revenues the Islamist group collects on Egyptian fuel, cement and other goods passing through the tunnels, Hamas is failing to pay salaries for many state employees in full or on time.

Long petrol queues and idled construction sites attest to an economic slowdown in a territory already under duress from strict trade and movement restrictions imposed by Israel, which controls Gaza’s northern, eastern, and maritime and aerial borders.

“It’s a real problem financially,” says Omar Shaban, director of PalThink, a research group based in Gaza City. “A significant part of the Hamas government income was generated from tax from the tunnels.”

In a territory with few exports, construction and revenues from the tunnel trade are two of the main sources of economic activity.

“The (problem) today in the Strip is fuel and money,” says an official with the Israel Defence Forces, which keeps close watch on developments in Gaza. “The shortage of money is the big question. We don’t see much money coming in.” Another IDF official described Hamas’s situation as “fragile”.

Gaza’s government is playing down its financial problems. On Wednesday Ziad al-Zaza, Gaza’s minister of finance, said the government was dealing with the crisis “wisely and in a balanced way”. He blamed the funding crisis on “the siege imposed on Gaza and the conspiracy of external parties that have been trying by different means to make the government and people surrender”. more (Financial Times - subscription may be required)

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