UNCTAD says Gaza reconstruction needs reach $71.5 billion as Palestinian finances strain

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Gaza reconstruction costs UNCTAD report

Highlights

Gaza's recovery and reconstruction needs reach $71.5 billion according to UNCTAD, with 92% of economic establishments damaged or destroyed since October 2023.
Israel withholds all clearance revenue transfers to the Palestinian Government from May 2025 through mid-2026, driving accumulated deductions and arrears to $3.67 billion and pushing total public debt to $4.8 billion in 2025.
Gaza's share of Palestinian GDP drops from 17.4% pre-October 2023 to under 4% in 2025, with agriculture and industry output down 94% and construction down 99% from 2022 levels.

UNCTAD report outlines damage and fiscal stress

As reported by UNCTAD, citing its latest report to the UN Trade and Development Board, Gaza's recovery and reconstruction needs are estimated at $71.5 billion and there is severe strain on the Palestinian economy, public finances and banking system.

The report says 59 years of occupation have constrained the Palestinian economy, with structural and economic costs rising sharply since October 2023. After a sharp contraction in 2024, Palestinian GDP grows by 4.3% in 2025 from a low base but remains 20% below its 2022 level. Gaza's real GDP rises by 34.2% after an 83% contraction in 2024, which the report describes as a statistical rebound from a sharply reduced base.

In the West Bank, the report documents reduced access to land and natural resources linked to settlement expansion. It says 38 communities have been emptied of Palestinians since 2023, while displacement in the first quarter of 2026 exceeds the total recorded in 2025.

The report says the Palestinian Government's fiscal position deteriorates sharply as Israel, under the Paris Protocol, collects more than two thirds of Palestinian fiscal revenue on its behalf. According to UNCTAD, clearance revenue transfers due to the Palestinian Government are fully withheld from May 2025 through mid-2026, and cumulative deductions and withheld revenues between January 2019 and March 2026 exceed an estimated $3.67 billion.

UNCTAD estimates the 2025 budget deficit at 13% of GDP when unpaid clearance revenues are excluded, compared with 6% when those revenues are counted as due to the Government. To finance the gap, the Government increasingly borrows from domestic banks and accumulates arrears to suppliers and the pension fund, bringing total public debt to $4.8 billion in 2025.

Economic collapse deepens risks for services and recovery

The report says these fiscal pressures constrain essential services, with health-related arrears reaching $1.1 billion by late 2025 and raising risks for hospitals, non-governmental providers and pharmaceutical suppliers. In the West Bank, resource shortages lead schools to limit in-person instruction to three days a week in 2025.

Banking sector exposure to the public sector reaches $5.3 billion, or 42% of all bank lending, when combined with loans secured against government salaries. UNCTAD also says the short validity of letters of indemnity issued by Israeli authorities affects correspondent banking relationships, while restrictions on currency repatriation limit Palestinian banks' ability to convert physical shekel banknotes into digital balances.

In Gaza, the report estimates that 92% of economic establishments have been damaged or destroyed since October 2023. GDP per capita stands at $212 in 2025, equivalent to about $0.58 per person per day in GDP terms, while unemployment reaches 78% and more than 90% of the working-age population is not employed.

Gaza's share of Palestinian GDP falls from 17.4% before October 2023 to less than 4% in 2025. Agriculture and industry are each down 94% from 2022 levels, while construction is down 99%, according to the report.

A rapid damage and needs assessment by the World Bank, the European Union and the United Nations puts physical infrastructure damage in Gaza at $35.2 billion and economic and social losses at $22.7 billion as of early 2026. UNCTAD says recovery across the Occupied Palestinian Territory will require large-scale international financial and technical assistance, with immediate priorities including transferring withheld Palestinian revenues, safeguarding the banking system and aligning reconstruction support with the scale of documented damage.

In our earlier article on the UK’s shrinking Budget headroom, we explained how higher borrowing costs, weaker growth expectations and elevated public debt were tightening the government’s room to manoeuvre ahead of the next fiscal event. We noted that with limited scope for major tax rises, even small shifts in growth, inflation or gilt yields could quickly force tougher trade-offs between taxes, spending cuts and additional borrowing—keeping bond market sensitivities in focus.

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