The Palestinian government will pay civil servants half of their salaries after Israel withheld tax money collected on its behalf, according to the Palestinian finance minister.
"The government will pay 50 per cent of the salaries," Shukri Bishara told a press conference in the West Bank city of Ramallah on Sunday.
He said the government has also applied a host of austerity measures, including halting the appointment of new civil servants, promotions and additional allowances.
"The government needs to borrow around $50-60 million a month from the local market to meet its obligations towards its employees and state institutions," he said.
Last month, the Ramallah-based government refused to accept deducted tax revenues collected by Israel on behalf of the Palestinian Authority (PA).
The move came after the Israeli government decided to deduct some 502 million Israeli shekels (roughly $138 million) from the Palestinian tax money, citing that the amount was being paid by Ramallah to the families of Palestinians involved in attacks against Israeli targets.
Palestinian President Mahmoud Abbas has decried by the Israeli measure, saying his government would continue to pay monthly stipends to the families of Palestinian prisoners and martyrs.
Israel collects around $175 million each month in taxes on Palestinian imports and exports on behalf of the PA, for which tax revenue represents the main source of income.