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Last Updated: Thursday, 4 May 2006, 14:02 GMT 15:02 UK
Hamas seeking central bank funds
Palestinian woman begging
The UN warns poverty will rise if salaries continue to go unpaid
Hamas has turned to the Palestinian central bank for a $100m (54m) loan to help ease the Palestinian Authority's (PA) funding crisis.

The Palestinian Monetary Authority said it was looking at the approach, but suggested it would be turned down.

Hamas' request comes as a cash crunch hits salaries and spending at the PA.

The problems follow Hamas' victory in PA elections earlier this year, which triggered cuts in Western aid and a reluctance among banks to provide cash.

Boycott fear

With EU and US donations frozen unless Hamas renounces its calls for the destruction of Israel, many Palestinian government workers have now been without pay for two months.

$116m: PA's monthly wage bill
PA employs 165,000 people
25% of people in West Bank and Gaza depend on PA wages

The Palestinian Authority employs some 165,000 people, and the UN estimates that a quarter of the Palestinian population relies on government salaries.

George al-Abed, governor of the central bank, said it would have to look at the fact that Hamas is currently blacklisted by the US and European Union as a terrorist organisation, and that under international law it is illegal to finance such groups.

"We would lay ourselves bare to a boycott if we took decisions contrary to international law on money laundering and financing terrorism," said Mr al-Abed.

He also added that Palestinian fiscal law prevents borrowing from the central bank to finance budget deficits.

World Bank solution?

Hamas has recently had to resort to paying workers directly with funds donated by the Arab League.

The Palestinian Authority's monthly wage bill runs to about $116m.

French President Jacques Chirac has meanwhile argued for the creation of a World Bank fund to pay Palestinian Authority workers.

The proposal has been welcomed by Palestinian leader Mahmoud Abbas of the Fatah faction. Hamas has said it would consider the idea.

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