Under Israeli Bombs, a Wartime Economy Emerges in Gaza

Palestinians displaced by the Israeli air and ground offensive on the Gaza Strip walk through a makeshift tent camp in Deir al Balah, Gaza, Sunday, May 12, 2024. (AP Photo/Abdel Kareem Hana)

DEIR AL BALAH, Gaza Strip — On tables and desks from schools turned shelters, wartime vendors lined a street, selling used clothes, baby formula, canned food and the rare batch of homemade cookies.

In some cases, entire aid parcels — still emblazoned with the flags of their donating countries and meant to be distributed for free — were stacked on sidewalks and sold for prices few could afford.

Issam Hamouda, 51, stood next to his paltry commercial offering: an array of canned vegetables and beans from an aid carton his family had received.

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“Most of the goods found in the markets are labeled, ‘Not for sale,’” he said.

Before the Israel-Hamas war devastated the Gaza Strip’s economy, he was a driving instructor. Now Hamouda supports his family of eight the only way he can — by reselling some of the food aid they receive every few weeks.

“Once, I got 4 kilos of dried dates and sold a kilo for 8 shekels,” he said, referring to the Israeli currency amounting to roughly $2.

In the seven months since Israel started bombarding Gaza and imposed a siege in response to the Oct. 7 Hamas-led attack, the enclave’s economy has been crushed. People have been forced to flee their homes and jobs. Markets, factories and infrastructure have been bombed and flattened. Farmland has been scorched by airstrikes or occupied by Israeli forces.

In its place, a war economy has arisen. It is a marketplace of survival focused on the basics: food, shelter and money.

Humanitarian aid labeled “Not for resale” and looted items end up in makeshift markets. People can earn a few dollars a day evacuating displaced people on the backs of trucks and donkey carts, while others dig toilets or make tents from plastic sheeting and salvaged wood.

Given the growing humanitarian crisis and deep desperation, standing in line is now full-time work, whether at aid distribution sites, at the few open bakeries or at the handful of ATMs or money exchange shops.

It is a “subsistence economy,” said Raja Khalidi, a Palestinian economist based in the Israeli-occupied West Bank.

“It’s not like any war we’ve seen before, where a certain area is targeted, and other zones are less touched and they can quickly reengage in economic conditions,” he said. “From Month 1, the economy was put out of commission.”

In the years before the war, the economy in Gaza — even under a suffocating air, land and sea blockade imposed by Israel and Egypt — was beginning to improve, according to economists and Palestinian businesspeople. Beachside hotels and restaurants were opening. More Palestinians got permits to work in Israel and earned good salaries.

All of those gains — and more — have been lost.

The majority of Palestinians in Gaza now face poverty on multiple levels, going beyond a lack of income and including limited access to health care, education and housing, according to a recent report from the World Bank, European Union and United Nations. Around 74% of people are unemployed, the report said. Before the war, the unemployment rate, while high by many standards, was 45%.

The shock to Gaza’s economy is one of the largest in recent history, the report said. Gaza’s gross domestic product dropped by 86% in the last quarter of 2023.

Israel’s Defense Ministry said its strikes on Gaza were not aimed at degrading the enclave’s economy and were targeting Hamas “terrorist infrastructure.”

The economy is now largely driven by the restricted supply and desperate demand for aid. Before the war, some 500 trucks carrying humanitarian aid, fuel and commercial goods entered the Gaza Strip each day.

After the war began and new Israeli restrictions were imposed, that number fell significantly, to 113 a day on average, though it has increased modestly in recent months. Even with the improvements, it is far below what aid agencies say is necessary to feed Palestinians.

Now the flow of aid and goods has nearly stopped, following Israel’s attack on the southern city of Rafah and the nearly complete closure of two main border crossings.

Hunger is spreading across the enclave, in what human rights and aid groups have called a weaponization of starvation by Israel. Israel has denied the accusations.

Against the backdrop of conflict, chaos and lawlessness, prices have skyrocketed. Since the Rafah incursion, goods in the market have gotten even more expensive. And for hundreds of thousands of Palestinians fleeing Israel’s offensive, transportation away from the airstrikes is costing hundreds of dollars.

Even before the situation in Rafah deteriorated, aid deliveries were inconsistent and chaotic because of Israeli military restrictions, resulting in desperation and an opportunity for armed gangs or individuals to loot, according to residents.

“The food aid is dropped or brought in and stolen by armed people like gangs,” said Majeda Abu Eisha, 49, a mother of 10.

While trying to get aid, she said her son and nephew were shot and injured by Israeli soldiers. They did not manage to get any aid.

“The winner in this battle is the armed one who can get whatever he wants from the aid,” Abu Eisha said. “Anyone who is not armed or strong enough to fight and push in goes home empty-handed.”

The Israeli military said it would “never deliberately target aid convoys and workers.” It added that it would continue to counter threats “while persisting to mitigate harm to civilians.”

Without sufficient aid deliveries, residents must turn to the makeshift markets. Goods there can be sold for whatever the sellers choose. Prices often follow the escalations of the conflict.

Sugar was recently being sold in Rafah markets for 7 shekels — less than $2. Then the next day, Hamas fired more than a dozen rockets at Israeli forces near the Kerem Shalom border crossing between Gaza and Israel, leading to its closure. In the hours after, the price went up to 25 shekels. The following day, the price of sugar went down to 20 shekels.

“The same item can be sold for different prices in the same market,” said Sabah Abu Ghanem, 25, a mother of one and former surfer. “When the police are there, traders will sell things for the prices the police decide. When the police leave, prices go up immediately.”

Residents say that officials and ministries associated with the Hamas-run government are present in some capacity, especially in the south.

While some Palestinians say the police have tried to force war profiteers from selling goods at inflationary prices, others have accused Hamas of benefiting from looted aid.

Hamouda said that the aid his family occasionally received came from the Hamas-run Ministry of Social Development, which oversees welfare programs.

He said packages were often missing a few items — especially foods like sugar, dates or cooking oil. Other times, he said, they received only a few canned vegetables in black plastic bags. The food items that go missing from aid parcels eventually end up in markets sold at high prices, he said.

Ismael Thawabteh, the deputy head of the Hamas government media office, said the ministry received about one-quarter of the aid brought into Gaza, which it then distributes. “The allegations that the government in Gaza is stealing aid are absolutely false and incorrect,” he said.

Looting of aid is carried out by a small number of people who have been forced into desperation by Israel, Thawabteh said. He said the Hamas government had tried to clamp down on such looting, but its police and security personnel had been targeted by Israeli airstrikes.

The Israeli military has said it has targeted police officers and commanders, as well as stations and vehicles, as it tries to “dismantle Hamas military and administrative capabilities.”

With the disappearance of most jobs, people have found new ways of earning a few dollars, as the war has given rise to new needs.

Many of Gaza’s displaced residents are living in tents, so the making of temporary shelters and bathrooms has become a cottage industry.

Tents made of thin plastic sheeting and planks of wood can be sold upward of 3,000 shekels, or $800, people in the city of Rafah have said. Unable to pay, others have cobbled together their own tents from tarps and salvaged wood.

“I bought those covers at a costly price,” said Hamouda, referring to the tarps he used to make his family’s shelter. “We bought a secondhand toilet for 250 shekels and paid 50 shekels for the plumber who installed it.”

The cost, he said, was more than twice what it was before the war.

Even getting access to one’s own money to pay for the war’s inflated prices has allowed some to take advantage of the crisis.

Few ATMs are still operating across Gaza, and those that are functioning are usually crowded by people trying to get their money out. Often, someone armed watches over an ATM, charging a fee to use it. Money changers offer people access to their own money in exchange for high commissions.

“I could only get my salary from some people who took a percentage of 17 of the total amount of money,” said Ekrami Osama al-Nims, a father of seven displaced to the south, who is a civil servant.

He tried multiple times to get a bag of flour from aid trucks — despite the risk of being shot by Israeli soldiers, he said — in order to avoid having to buy it from the black market. But he never had any success.

“My salary used to cover us for an entire month of food and other basic needs,” he said. “Now my salary doesn’t even buy half of a bag of flour.”

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