Saudi Arabia has given the Palestinian Authority £68m to avoid bankruptcy, after Israel refused to hand over the taxes it collects on behalf of the governing body.
Teachers and other public servants in the West Bank have not been paid in full for months, with some not receiving any money at all.
Under the Oslo Accords agreed in the 1990s, the Palestinian economy runs on the Israeli shekel.
The Israeli government collects taxes from the Palestinians and is supposed to send the funds to the PA.
However, since May, Bezalel Smotrich, the ultra-nationalist Israeli finance minister, has refused to sign the monthly transfers, in apparent retribution for Western moves to recognize Palestine as an independent state.
This was in addition to an earlier decision to withhold millions of dollars each month to compensate for what Israel said was the PA’s continued practice of giving stipends to the families of terrorists, the so-called “pay to slay” scheme.
The PA says the scheme has now been stopped, but Israel disputes this.
The Saudi grant, which should keep essential PA services running for a few more weeks, was formally awarded at the oil-rich kingdom’s embassy in Amman, Jordan, on Monday.
Riyadh broadly supports Donald Trump’s peace plan for Gaza.
However, it continues to insist that it sees a viable path to a Palestinian state as a price for the diplomatic recognition of Israel and the opening of trade between the two countries.
Under the leadership of Benjamin Netanyahu, Israel strongly opposes an independent Palestine, but the impasse has not stopped the increase in cooperation between the United States and Saudi Arabia.
President Donald Trump and the Saudi Crown Prince have been talking about Gaza – Evan Vucci/AP
Mr Trump signed a significant defense deal with Crown Prince Mohammed bin Salman last month, including a commitment to provide F-35 stealth fighter jets, a decision that has raised concerns among Israeli military chiefs.
Britain, France, Australia and Canada all reversed decades of diplomatic strategy in September by formally recognizing Palestinian statehood.
However, the reality of life on the ground in the West Bank has never been worse for Palestinians, with daily attacks by violent convoys and increased road blocks imposed by the IDF stifling economic activity.
Israel says it establishes the checkpoints for security reasons.
Mr Smotrich, who is from the West Bank settler community, has previously said he has “no interest” in the existence of the PA.
Bezalel Smotrich refused to sign monthly payments to the Palestinian Authority – Bloomberg/Kobi Wolf
In addition to withholding tax revenue, he threatened to collapse the entire Palestinian banking system by promising not to renew an indemnity waiver, without which Israeli banks would not trade with Palestinian banks.
He first threatened the measure in 2024 after the imposition of sanctions against him by the Biden administration.
Last weekend, he authorized a two-week extension to the waiver, which allows the financial system to limp on, although its future beyond mid-December is unknown.
Along with Norway, France and Spain, Saudi Arabia launched a fund-raising campaign to prevent the collapse of the PA.
The body exercises administrative and security control in certain areas, mainly large cities, and only administrative control in others, with Israel in charge of police and security.
In the majority of rural areas, the Israeli military maintains full administrative and security control.
The IDF said two Palestinian militants were shot dead in separate attacks in the West Bank on Monday, both of which wounded Israeli soldiers.
The incidents came amid weeks of escalating violence by ultraviolent settler youth.
The PA also accused the IDF of raiding and forcing the closure of Palestinian agricultural workers’ committee offices over the weekend, in an effort to stifle local farming activity.
Pictures appeared in local news outlets that appeared to show office workers on their knees covered by soldiers.
The IDF said they had confiscated “incitement materials” during the raid, confiscated equipment and money intended for terrorism, and detained eight people.
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