The Progressive Unionist Party may have to close an office because its assembly allowance is being withheld, David Ervine has said.
David Ervine said his party is struggling
Sanctions were imposed on the party earlier this year after a report highlighted continued activity by the Ulster Volunteer Force, to which the PUP is linked.
In its latest report last week, the IMC remained critical of the UVF and its involvement in two murders.
PUP leader Mr Ervine said without the funding, his party may have to close its Shankill Road office.
Mr Ervine told the BBC's Inside Politics programme on Saturday that he was doing his best to tackle paramilitary activity, but the party was struggling to serve constituents.
"I think that at the moment we're on a wing on a prayer," he said.
"We're absolutely hand to mouth and I think if the secretary of state does not restore that party allowance very soon, we can't survive in some aspects of our work."
Secretary of State Paul Murphy announced in April that sanctions would be imposed on parties linked to paramilitary groups still involved in violence and other criminal activities.
The move came after the publication of an Independent Monitoring Commission (IMC) report which recommended action against Sinn Fein and the Progressive Unionist Party in response to continuing IRA and loyalist violence.
In its latest report last week, the IMC said the UVF remained a "ruthless organisation retaining a capacity for more widespread violence".
Most violence was attributable to loyalist groups, with a greater proportionate reduction by republican groups, it said.
It found paramilitaries on both sides were still "deeply engaged in serious organised crime".
The commission said links still existed between the IRA leadership and Sinn Fein, as well as the UVF and the Progressive Unionist Party.
The IMC report was handed over to the British and Irish Governments last week.
The institutions in Northern Ireland were suspended two years ago amid allegations of IRA intelligence gathering at the Northern Ireland Office.
At the conclusion of intensive political talks at Leeds Castle in Kent last month, Tony Blair and Bertie Ahern said the thorny issues of IRA disarmament and future paramilitary activity appeared to be resolved.
However, the two governments were unable to get the Northern Ireland Assembly parties to sign up to a deal over power-sharing after unionists and nationalists clashed over future devolved institutions.
The sticking points in the political process have included the method of electing a first and deputy first minister, a date when the assembly can control policing, and whether or not 30 assembly members can challenge ministerial decisions.