JERUSALEM—The Palestinian economy grew by a resounding 9% in the West Bank and 16% in Gaza through the first half of 2010, due to the easing of Israeli restrictions, donor aid and aggressive financial-sector overhauls by the Palestinian Authority, according to the International Monetary Fund.

The latest IMF growth figures are likely to sharpen debate between those who say Israel has taken sufficient steps to improve Palestinians' daily lives and those calling on Israel to go further. They come amid mounting tensions between...