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Donor funds have begun flowing into an account controlled by Palestinian Authority Finance Minister Salam Fayyad, effectively ending the international boycott of the Hamas-led government.
The funds will be used to pay partial salaries to tens of thousands of PA civil servants.
Fayyad said Sunday that the new account, which had been set up to bypass an international boycott of the Hamas-led government, is a key step toward restoring relations between the Palestinians and donor countries.
However, the end of the boycott, imposed when Hamas rose to power more than a year ago, is not yet in sight, Fayyad told The Associated Press.
UAE gives Palestinian Authority $80m.
"We have started using the PLO account," PA Information Minister Mustafa Barghouthi confirmed. "This is an important step toward lifting the siege."
A May 14 letter from the US to the European Union authorized the deposit of funds in Fayyad's account.
While Arab countries and Norway have already put a total of $184 million into the new fund, the two biggest donors to the Palestinians - the US and EU - have not committed to it, he said.
The new fund was established last month. Donor countries can now send money to this account without concern that banks involved in the transfer will run afoul of US anti-terror regulations, Fayyad said.
"As a legal matter, there is now a full possibility of having money transferred directly to us without risk that the money might be intercepted [or] seized, or causing banks doing the transactions any trouble with the correspondent banks," he said.
Fayyad said his ultimate goal was to restore the single Treasury account he had operated before Hamas came to power in March 2006. The account was dismantled under the previous Hamas-controlled government. Instead, donors then bypassed the Hamas-run Finance Ministry by parceling out aid directly to different recipients, such as subsidies to tens of thousands of unpaid civil service workers.
Fayyad said he has been in touch with EU officials about sending aid to the PLO account.
"There are obviously political considerations that have so far gotten in the way of that normalization," he said. "Nevertheless, what we are seeking to accomplish is working closely with the EU, hopefully to get to that point in the not-too-distant future whereby they are able to transfer money to us directly."
Fayyad's biggest challenge is to cover the bloated government payroll for 165,000 employees, half of them members of the security forces.
"We are trying to impart a little bit of order to that process, at least hoping that this would reduce the level of anxiety on the part of not only the government employees, but also other segments of the population that deal with the Palestinian Authority," he said.
Over the weekend, the United Arab Emirates transferred $80 million to the PLO account. The money will also be used to pay salaries.
Fayyad said he hoped that with the new mechanism in place, more pledges would now come in. However, he said, the key to getting out of the crisis is a resumption of Israeli tax transfers.
With Hamas's rise to power, Israel froze the transfer of some $55 million a month that it collects on behalf of the Palestinians, much of it from Palestinian workers in Israel.
That money amounts to about two-thirds of local Palestinian revenue, Fayyad said.
He added that the new account might give the Palestinians a stronger case to demand payment.
Fayyad said only a political solution to the conflict can help solve the Palestinians' economic woes. He cited a recent World Bank report that said the Palestinian economy cannot recover unless Israel lifts its system of restrictions on Palestinian movement and trade.
"There has to be a better tomorrow for everybody, for both of us, Israelis and Palestinians," he said. "Where we are in right now is an extremely difficult and dangerous situation."
On Saturday, the Dutch Foreign Ministry announced that it would be dispatching a "special grant" of 6.3 million euros ($8.4 million) to the PA in the coming months. Foreign Minister Maxime Verhagen insisted that the funding is "also in Israel's best interests," as the money would improve the humanitarian situation for 17,000 policemen and their families.
"This allowance will not only help increase safety in the territories, but also will improve living conditions for police officers and their families," the Dutch ministry stated in a press release.
"The Palestinian civilian police have played an important role in recent months in containing and calming disturbances among Palestinians, notably in the Gaza Strip; the police must be strengthened to maintain and enhance safety and public order in the Palestinian territories."
In recent weeks, Qatar gave $44 million, Norway gave $10 million and Saudi Arabia donated $50 million to the PA.
Japan is also considering renewing direct funding to the PA. It has donated about $900 million to the PA since 1993.
According to a recent report by the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), donations to the PA from foreign countries rose by almost 300 percent in 2006, totaling $900 million - as opposed to $349 million the previous year. The sharp increase came despite the international boycott.
According to the report, both Arab and Western countries have increased their donations, channeling them through an account known as the Temporary International Mechanism and the office of PA Chairman Mahmoud Abbas.
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