'Liquidity crisis'

Ghassan al-Khatib, a PA spokesman, said the authority planned further spending cuts, but that none would affect the salaries of some 148,000 public employees in the West Bank and Gaza Strip.

Khatib told the Reuters news agency that the Palestinians wished "to save money because of this financial crisis and to keep the path of reform going" and were aiming to reduce dependence on donor aid.

The PA's main Arab donors, Saudi Arabia and the United Arab Emirates (UAE), have contributed considerably less this year than they have annually since 2007.

So far, Saudi Arabia has donated $30.6m up until August, compared to $241.1m in the same period in 2009.

The UAE, which contributed $173.9m in 2009, has yet to offer any aid this year.

A United Nations report last week said the PA "will face a serious liquidity crisis in September and will have difficulty paying August salaries" due to the aid shortfall.

But Palestinian officials have said that wages for August have been secured.

Palestinian policymakers have cited previous donor support as a key factor behind strong economic growth in the West Bank in the last two years, estimated at up to 8 per cent for 2010.