Israel said in November that it would withhold funds bound for Hamas-ruled Gaza, even though the Palestinian authorities cover public sector expenses.
The Palestinian government has accused Israel of deliberately pushing the Palestinian economic situation towards disaster by failing to disburse Palestine's clearance funds for the second consecutive month.
A statement by the Palestinian Embassy in Nigeria said the withholding of funds is due to Israel's insistence on deducting the amount that the Palestinian National Authority pays to Gaza.
"This action is pushing the Palestinian economic situation towards disaster," Palestine said in the statement.
Both states have an agreement that the Israeli government collects the taxes imposed on goods imported to the Palestinian side on behalf of both parties.
The funds are then remitted to the Palestinian government at the end of each month after 3 per cent of the received funds is deducted for the payment of salaries and operating expenses in the West Bank and Gaza Strip.
The Israeli occupation forces currently control the border crossings, forcing Palestinians to import and export goods through the Israeli side only.
But the Israeli government has failed to remit the funds collected since the beginning of the latest war in Gaza in October, the Palestinian government said.
"The occupying authorities have been adamant about withholding a portion of the funds allocated for the expenses of the Palestinian government in the West Bank. This is part of their collective punishment policy against Gaza, and serves to further isolate Gaza from the West Bank," the statement added.
The statement added that the Palestinian President, Mahmoud Abbas, refused to receive mutilated funds from the Israeli side, insisting that the Israeli government must remit the share allocated to the Gaza Strip.
But Israel has refused to hand over the Palestinian funds in full.
Israel said in November that it would withhold funds bound for Hamas-ruled Gaza, even though the Palestinian authorities cover public sector expenses.
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This, according to Palestine, has led to the inability of the government to pay the full salaries of employees in the West Bank and Gaza Strip for the second month in a row.
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It said the Palestinian government has now been forced to borrow from local banks to cover part of employees' salaries for October in both the West Bank and Gaza Strip.
"In addition to the catastrophic developments taking place in the Gaza Strip, the failure to transfer tax funds and the inability of the Palestinian government to pay salaries and other expenses has pushed more Palestinian families towards the poverty line; and hampers the government's work in many sectors, particularly in health and education. This will lead to a further deterioration of the situation in the Gaza Strip and West Bank."
The war in Gaza has seen the death of almost 20,000 people including journalists and aid workers. The war started on 7 October after Hamas launched what has been described as the biggest attack against Israel in years.
In reaction, Israel promised to wipe out Hamas, leading to a relentless attack on Gaza, killing thousands of people, the majority of whom are women and children, and displacing about 90 per cent of the two million Gaza residents.
