NEW YORK: The Palestinian government is in ‘extreme jeopardy’ because of a financial crisis largely caused by Arab countries’ failure to send hundreds of millions of dollars in promised aid, and the Israeli decision to stop transfer of tax revenues, the New York Times said on Monday citing Palestinian prime minister.

The crisis has worsened in recent years, and the government, the Palestinian Authority, has reached the point of not being able to pay the salaries of about 150,000 government employees, said Prime Minister Salam Fayyad. If the crisis continues, he said, the number of Palestinians in poverty was bound to double to 50 per cent of the population of roughly four million people, the report said.

The newspaper reported in December that Israel halted its monthly transfer of about $100 million in tax revenues it collects on behalf of the Palestinians. That sum amounts to about one-third of the monthly operating costs of the Palestinian Authority. Mr. Fayyad put most of the blame for the Palestinian Authority’s financial troubles on delinquent Arab donors, saying they are “not fulfilling their pledge of support in accordance with Arab League resolutions”.

European countries kept their aid commitments, he said.

About $200 million in American aid was held up by Congress last year, a sum the Obama administration hopes to deliver to the Palestinians this year, along with $250 million more.

The Palestinian Authority, set up two decades ago as part of interim peace deals with Israel, is on the “verge of being completely incapacitated,” Mr Fayyad warned.

The government was meant to be temporary and to be replaced by a Palestinian state, which was to be established through negotiations with Israel. But those talks have repeatedly broken down, and for the past four years the two sides have been unable to agree on the terms for renewing them.

In November, the authority’s President Mahmoud Abbas won United Nations recognition of Palestine in the West Bank, Gaza and East Jerusalem as a non-member observer state, overriding Israeli objections to the largely symbolic step. On Sunday, Mr Abbas asked his government, which is based in the West Bank, to prepare for replacing the words “Palestinian Authority” with “State of Palestine” in all public documents, including identification cards, driving licences and passports.