Israel transferred US $118 million of frozen tax funds it has been holding since Hamas's victory in the Palestinian elections last year, Palestinian sources were quoted Sunday as saying by Israel Radio. Israel was planning to transfer all frozen taxes in several installments. Israel was trying to bolster Palestinian Authority Chairman Mahmoud Abbas in his standoff against the rival Hamas group, which violently seized control of the Gaza Strip last month. Jacob Galanti, another official in Prime Minister Ehud Olmert's office, said the transfers would begin later Sunday. In Ramallah, officials in the office of Abbas's prime minister, Salaam Fayad, said Israel had said the money would be transferred by Monday. They said the money was needed to pay the salaries of government workers. Under peace agreements reached in the 1990, Israel collects customs duties on behalf of the Palestinians then transfers the money to the PA government. The funds, roughly $50m. a month, are a key component of the Palestinian government budget. Israel cut off the transfers after was elected to power in January 2006, saying Hamas could use the money to carry out attacks. The tax funds release is the second goodwill gesture to be offered to the Abbas government in recent days. At the summit in Sharm e-Sheikh last week, Olmert announced that Israel would release 250 Fatah prisoners. "As a gesture of goodwill to the Palestinians, and amid an understanding of the importance of the issue of the prisoners, I decided today that I'll bring to the Israeli government at its next meeting a recommendation to release 250 prisoners from Fatah, without blood on their hands, as long as they sign commitments not to again become involved in terrorism," Olmert told the gathering at the Red Sea resort.