The Palestinian Authority said yesterday it started paying overdue salaries to an estimated 140,000 workers and security personnel, but does not know where it will get the money for the next payroll.
The immediate funding crisis stems in large part from Israel's decision to freeze tax revenue transfers to the cash-strapped authority in a bid to isolate Hamas after its recent election victory.
The tax revenues, which are collected by Israel on behalf of the Palestinians, are worth $60 million to $66 million a month.
Finance Ministry official Jihad al-Wazeer said the authority had secured the funds for February salaries and had begun to pay them out. But Wazeer said it was unclear where it would get the funds to cover March's payroll.
The World Bank, European Union and other foreign donors provided emergency funding to help keep the PA running until Hamas forms a government.
Palestinians depend on foreign aid totaling more than $1.2 billion a year. It is unclear how much of that money will be frozen by international donors once Hamas completes forming a government, which under Palestinian law must happen by the end of this month.
A proposal being discussed by Israel and donor nations would funnel most future international aid to the Palestinians through the World Bank. U.S. officials have rebuffed a European proposal to funnel that money directly through the office of PA Chairman Mahmoud Abbas, Western diplomatic sources said.
As many as one in four Palestinians is dependent on wages from the Palestinian Authority, prompting warnings from international Middle East envoy James Wolfensohn that violence could break out if salaries were not paid.