The Palestinian government in the West Bank has made "significant strides" toward reducing its huge budget deficit, but international donors need to transfer an additional $400 million to close the spending gap in 2008, the International Monetary Fund said in a report Friday. The IMF also urged Israel to ease movement restrictions in the West Bank to help the Palestinian economy recover. So far, the restrictions have been tightened, the fund said. If restrictions are not eased, the Palestinian economy will likely contract, despite Palestinian reform and massive foreign aid, the report warned. The fund is issuing quarterly reports to check on progress in a three-year Palestinian development plan that is being underwritten by $7.7 billion in international aid. In presenting the plan to an international donors' conference in December, the government of Prime Minister Salaam Fayad pledged to cut public spending and to reduce the budget deficit, which currently amounts to 27 percent of the West Bank's Gross Domestic Product.