US Secretary of State Hillary Rodham Clinton announced Wednesday that 150 million dollars in direct aid was being transferred to the Palestinian Authority, dpa reported.
She praised the government of President Mahmoud Abbas for progress in creating a growing economy and improving security.
"The Palestinian Authority is reversing a history of corruption and producing results that actually matter and improve the lives of Palestinians," Clinton said. "As a result, new businesses are opening, taxes are being collected, services are being delivered. Security is much improved, and the economy is growing."
Clinton made the announcement while Palestinian Prime Minister Salam Fayyad participated via a video link-up. The money will go toward closing the gap in budget shortfalls and continuing to fund vital government services.
The latest US aid brings the amount of direct funding for 2010 to 225 million dollars and total assistance to the Palestinian Authority including that through third parties to 600 million dollars, Clinton said.
Despite the progress in the West Bank, there are still gaps in the Palestinian budget and high unemployment, Clinton said. "All this progress remains tenuous and there is much more work to be done," she said.
Fayyad said the millions of dollars in US aid have been vital to improving physical infrastructure like water, electricity and roads, as well as social services like education and health.
"There is hardly any sign of visible progress on the ground in Palestine today that does not have the caring fingerprints of" the United States, he said.
The transfer of the new funds comes as US-mediated peace talks between the Palestinians and Israelis have hit an impasse, with the Palestinians refusing to rejoin the direct negotiations since an Israeli moratorium on settlements expired September 26, just weeks after the re-launch of the talks.
Israeli announcements this week of plans for additional settlement construction in East Jerusalem, which the Palestinians envision as the capital of a future state, further complicate the negotiations. The United States has urged Israel to halt new construction.
"The United States was deeply disappointed by the announcement of advance planning for new housing units in sensitive areas of East Jerusalem," Clinton said. "This announcement was counterproductive to our efforts to resume negotiations between the parties. We have long urged both parties to avoid actions which could undermine trust, including in Jerusalem."
The announcement came as Prime Minister Benjamin Netanyahu was in the United States and is scheduled to meet with Clinton in New York on Thursday. Obama, travelling in Asia, said Tuesday the new settlement plans were unhelpful to the peace process. The dispute had created tension in the longstanding US-Israeli friendship.
Netanyahu`s Jerusalem office issued a statement late Tuesday, insisting that "Jerusalem is not a settlement. Jerusalem is the capital of the State of Israel" and that "Israel has never accepted upon itself restrictions of any kind on construction in Jerusalem."
It added it saw "no connection" between the peace process and Israel`s "planning and building policy in Jerusalem, which has not changed in 40 years."