The Palestinian Authority’s debts have reached $4.2 billion and the financial crisis is “more than difficult,” Deputy Prime Minister Mohamed Mustafa announced on Tuesday.

Mustafa, who was speaking to reporters in Ramallah following the new PA government’s first weekly meeting, said that the PA’s local debts were estimated at $600 million to $1.2 billion to banks and $480m. to the Palestinian Petroleum Authority.

Mustafa serves as deputy prime minister for economic affairs – a job that makes him the de facto finance minister.

Until his appointment last week, Mustafa was director of the PLO’s Palestine Investment Fund.

The PA’s external debts have reached $1b, he said. Failure to pay this debt has resulted in fines estimated at $100m., Mustafa added.

The PA also another $1b, to the Palestinian Pension Fund, he said.

He said that the PA was in need of financial aid to pay salaries to its employees in the coming months.

The PA will have to increase tax collection, cut expenses and seek additional funding from donor countries, Mustafa said.

He noted that Kuwait this week decided to give the PA a $50m. grant, which will go to paying a debt to one of the local banks.

Mustafa said that the new government is committed to the political platform of PA President Mahmoud Abbas and the PLO.

He expressed his government’s concern over Israel’s policy of construction in settlements and east Jerusalem.

He stressed the need for a full cessation of settlement construction before resuming peace talks with Israel.

The Palestinians had the right to “resist” the settlements, he said.

Meanwhile, the new PA Prime Minister, Rami Hamdallah, met in Ramallah on Tuesday with US Consul-General in Jerusalem, Michael Ratney, who congratulated him on his appointment.

A statement published by the PA said the two men discussed US efforts to support Hamdallah’s government.

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