US pledges $20m to Palestinians

The Palestinian economy has suffered during the intifada

The US government has pledged $20m (£10.3m) in direct aid to help the Palestinians out of a financial crisis.

It is believed to be only the second time in two years that Washington has transferred money in this way.

A senior administration official said the grant will provide emergency budget support, and recognises efforts made to shore up democracy ahead of elections.

Palestinians are preparing to vote on 9 January for a new leader to replace the late Yasser Arafat.

"The upcoming Palestinian elections have made a functioning Palestinian Authority more important than ever," an official told the BBC.

He said the Palestinian Authority was "in dire financial straits", barely able to pay its bills from month to month.

The money will be used to pay for utility services, including the payment of arrears to Israeli utility companies, the official added.

The announcement came as international donors met in the Norwegian capital, Oslo.

Peace hopes

The US hopes it will encourage other donors to boost their aid to the Palestinian Authority.

"Now there seems to be wide recognition at this conference of the urgent needs of the Palestinian Authority for immediate financial support," said Palestinian Labour Minister Ghassan Khatib.

Earlier, Palestinian foreign minister Nabil Shaath said the authority needed $4.5bn over three years for reconstruction and the development of infrastructure, such as building airports.

Speaking on the conference sidelines, he quoted the World Bank as saying the sum was a minimum requirement for the economic recovery of the Palestinian territories.

The BBC's Daniel Lak in Washington says the US donation is obviously far less than the Palestinians want, but Washington is unlikely to provide any new sums unless a peace process with Israel is renewed.

This announcement comes amid hopes that progress towards peace might be made following the death of Yasser Arafat.

Washington marked the appointment of Mahmoud Abbas as Palestinian Prime Minister with a direct grant of $20m in July 2003, our correspondent says.

But before that it suspended direct economic aid to the Palestinian authority, accusing Mr Arafat of tacitly supporting ongoing violence against Israel.