msnbc.com news services
updated 2/2/2006 8:37:25 AM ET 2006-02-02T13:37:25

The Palestinian Authority will delay paying the January salaries of 137,000 government employees for at least two weeks because of a severe post-election budget crunch, a senior Palestinian official said Thursday.

The Palestinian Authority needs $116 million to cover the monthly payroll. After the election victory of the Islamic militant Hamas last week, Israel said it was suspending its monthly tax transfers to the Palestinian Authority, worth about $45 million dollars, pending further review.

The Palestinian official spoke on condition of anonymity because he is involved in negotiations with donor countries for aid money.

Saudi Arabia and other Arab states are expected to speed money to the Palestinian Authority as early as Thursday to help it pay its employees after Israel halted tax payments, Palestinian officials said.

'Arab brothers' open wallets
Ahmed Qurie, prime minister until the formation of a new government, said the cash-strapped Palestinian Authority turned to its “Arab brothers” to cushion the economic blow of Israel’s decision. But he still held out hope that the Jewish state, under U.S. pressure, will agree to transfer the money.

Customs revenue collected by Israel on behalf of the Palestinians is the main source of funding for the authority’s budget, and is used to pay 140,000 government workers.

Palestinian officials said they expected Saudi Arabia and Qatar to provide at least $33 million in emergency funding on Thursday. The Saudi contribution was expected to top $20 million. Qatar was expected to provide more than $13 million.

“This aid is for the Palestinian people and its authority so it can carry out its duties,” Qurie said.

Jihad al-Wazir, the acting Palestinian Minister of Finance, said the United Arab Emirates would also make a contribution, but he did not provide a figure. Talks were also under way with Kuwait, Egypt and Jordan, officials said.

“We expect that (Palestinian) employees can withdraw salaries next week,” Wazir told Reuters.

But a Palestinian diplomat in Qatar denied that the $33 million figure was emergency aid.

“This money is nothing new and was negotiated before the elections,” he told Reuters in Doha, adding that Qatar and Saudi Arabia had agreed to donate $13 million and $20 million respectively before the elections.

A Riyadh-based Palestinian diplomat said Saudi Arabia will begin talks this month with the Palestinian Authority over financial aid of at least $1.2 billion to plug its widening budget deficit.

Israel freezes funds
Israel froze automatic monthly tax payments to the cash-strapped Palestinian Authority on Wednesday, one week after the election victory of the Islamic militant group Hamas. It had been scheduled to transfer nearly $55 million on Feb. 1.

The United States has since urged Israel to keep up the payments, at least until Hamas formally enters the government. Israel has not ruled out restarting payments after completing a policy review ordered by interim Prime Minister Ehud Olmert.

“We hope that Israel will release the money immediately,” Qurie said at the start of a cabinet meeting in Ramallah.

Olmert has called for a boycott of any Palestinian government that includes Hamas, whose charter calls for Israel’s destruction.

Hamas has carried out nearly 60 suicide bombings since a Palestinian uprising began in 2000. It trounced Palestinian leader Mahmoud Abbas’s long-dominant Fatah movement in the Jan. 25 parliamentary election.

Hamas has urged foreign donors to maintain aid but says it could still find other sources of funding in the Arab world. It has sent a delegation on a tour of Arab countries to urge them to keep the money flowing.

Unemployment in the Palestinian territories runs high, at 22 percent, and half the Palestinian population lives in poverty. In Gaza, many Palestinians live on an average of $2 a day.

The Associated Press and Reuters contributed to this article.

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