The Palestinian Authority confirmed on Sunday it could not pay March salaries to public employees because a widening international boycott of the Hamas-led government meant money had dried up.
"The financial situation is very difficult and there is no way to give a specific date for paying salaries," Finance Minister Omar Abdel-Razeq told al-Ayyam newspaper.
The Authority has faced the threat of an economic collapse because the United States, Europe and Israel have cut off funds since elections brought in a government last month led by the Islamic militants whose charter seeks to destroy Israel.
Abdel-Razeq had earlier said he hoped to pay the salaries of 140,000 government employees by mid-April, after promised aid from Saudi Arabia, Kuwait and the United Arab Emirates.
But even the pledged sum of $US80 million may not be enough to cover salaries and benefits that come to about $US118 million.
Abdel-Razeq said the mid-April estimate had been "given without having a clear picture of the size of the financial problem suffered" by the Palestinian government and an ensuing refusal by banks to lend it any money.
The Palestinian Authority "could not get loans because of the difficult financial situation it is going through", he said. Its debts now total $US1.3 billion, including $US640 million to regional and local banks, he added.
Israel cut all transfers of tax due to the Palestinians and its largest bank, Bank Hapoalim, said it would sever business ties with the Palestinian Authority after a cabinet led by Hamas, which won the January election, was sworn in on March 30.
The United States and European Commission followed by cutting all financial aid to the Palestinian Authority on Friday, in a move to press Hamas to renounce violence and recognise the Jewish state.
Hamas has described these decisions as blackmail and punishment for Palestinians electing Hamas.
