The Palestinian Authority is facing the possibility of financial collapse, the World Bank has said in a report, as revenue streams run dry and economic activity drops precipitously against the backdrop of the Gaza conflict, AFP reports.

“The fiscal situation of the Palestinian Authority has dramatically worsened in the last three months, significantly raising the risk of a fiscal collapse,” the World Bank said in a statement.

“Revenue streams have largely dried up due to the drastic reduction in clearance revenue transfers payable to the Palestinian Authority and a massive drop in economic activity.”

In the coming months, the authority’s deficit is expected to reach $1.2 billion, doubling the funding gap of $682 million at the end of 2023. The Palestinian economy was projected to contract between 6.5 and 9.6 per cent, although the Bank noted that the outlook remains “highly uncertain”.

“Increased foreign assistance and the accumulation of further arrears to public employees and suppliers are the only available financing options for the Palestinian Authority,” the World Bank said.