This study aimed to examine the impact of the financial crisis on institutional performance in the State of Palestine from the perspective of its employees. A descriptive-analytical approach was employed, using a questionnaire to collect data. The study population consisted of all employees of government departments in Jericho Governorate, totaling 322 individuals, from whom a random sample of 120 employees was selected. The study found that respondents strongly agreed that the financial crisis had a significant impact on Palestinian employees. This indicates a high-level impact of the ongoing financial crisis in Palestine, particularly in light of the interruption of public employees’ salaries or the deduction of a portion of their salaries, which reached up to 25% of the total salary in some months of 2022. Furthermore, respondents perceived the level of institutional performance in Palestine to be moderate, indicating that the financial crisis negatively impacts institutional performance across all Palestinian ministries and has weakened the provision of financial resources for these ministries. Moreover, the financial crisis has contributed to the inability to meet the needs of employees’ families, as the increasing cost of living due to the crisis has exacerbated the suffering of employees due to expenses exceeding their monthly income. The study recommended several measures, including addressing the multifaceted causes of the financial crisis that the Palestinian government can tackle, such as disguised unemployment, high expenses for senior officials, and hiring and promotions. Additionally, the study highlighted that the Palestinian budget allocates more than 46% to security agencies in some years, straining the budget. Therefore, the government should reconsider the budget allocated to security agencies through a well-planned and studied approach, aiming to reduce it.