The Palestinian Authority has agreed to accept hundreds of millions of dollars in tax revenues collected by Israel, after months of declining them in protest over Jerusalem withholding money over payments to terrorists, Palestinian officials said Friday.

The transfers amount to some 600 million Israeli shekels (about $170 million) a month and are a key source of financing for the PA.

The PA had refused to accept the funds because Israel was withholding an amount equal to what the Palestinians pay to terrorists and their families, but the cash-strapped PA appears to be retreating in the face of an economic crisis.

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Israel says the so-called Martyrs’ Fund rewards and encourages violence, while the Palestinians say it is a way to provide for needy families affected by the decades-old conflict.

Hussein al-Sheikh, an aide to Abbas, tweeted Friday that he had met with Israel’s Finance Minister Moshe Kahlon the day before to discuss “all outstanding issues” and that committees would continue the negotiations on Sunday.

“The agreement was also on transferring a payment from the #PA’s financial dues. The dispute (remains) over the salaries of the families of #prisoners and #martyrs. We are determined to pay their dues at all costs.”

A senior Israeli official told Channel 13 news that at the meeting between Kahlon and al-Shiekh, the two parties “agreed to disagree” on the matter of payments to terrorists and their families.

Israel will also consider further economic measures to ease the situation in the West Bank, the outlet reported.

Two Palestinian officials, who spoke on condition of anonymity because they were not authorized to brief media, said Israel will continue to withhold 42 million shekels ($12 million) a month, the amount it says goes to the Martyrs’ Fund.

In a speech before the UN General Assembly last month, Abbas vowed to continue the payments to the terrorists and their families.

“We are confident that the international community will not accept Israel’s arbitrary decision to withhold our revenues, and to confiscate a part of it,” he said, adding the Israeli action was “deepening the suffering of our people.”

Abbas concluded by praising those terrorists, calling them, “our honorable martyrs, courageous prisoners and wounded heroes.”

The decision back in February to reject the transfers has forced the PA to slash the salaries of tens of thousands of civil servants in the West Bank, where unemployment is estimated at 20%.

Observers are concerned that economic distress in the territory could feed radicalization of young Palestinians, already embittered by the lack of visible prospects for peace. Israel sees the stability of the West Bank as essential to its own security.

Abbas, who has been in power for nearly 15 years, has seen his popularity plummet over his failure to bring about an independent state through peace talks with Israel, his loss of Gaza to the terror group Hamas and the general economic malaise.

On top of the tax dispute with Israel, the United States has cut more than $500 million in aid to Palestinians via various programs. That came after Abbas announced a freeze in relations with Washington in protest at US recognition of Jerusalem as Israel’s capital.

In August, the Palestinian Authority said it had reached an agreement with Israel in which Israel would stop collecting about $60 million in monthly fuel taxes and allow the Palestinians to collect the funds directly.

The move was seen as a way of easing pressure on the Palestinian Authority, which works closely with Israel on security matters in the West Bank.