The move comes after Israel blocked tax transfers to the PA earlier this year over payments to Palestinian prisoners.

The Arab League has pledged to pay $100m a month to the Palestinian Authority (PA) to plug the gap left when Israel blocked tax transfers earlier in the year.

“We confirm that Arab countries will support the Palestinian state’s budget … [to] resist the political and financial pressure it faces,” the League said on Sunday following a meeting in the Egyptian capital, Cairo.

Israel collects taxes on behalf of the PA but withheld $138m in transfers in February over Palestinian payments to political prisoners jailed for attacks against Israelis.

The PA sees the payments as a kind of welfare system for families who have lost a breadwinner.

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The freeze came as the Palestinians face major budget cuts made last year after the United States slashed funding for the UN’s Palestinian refugee programme, UNRWA, and for development programmes in the Palestinian territories.

The UN’s World Food Programme also cut back services due to funding shortages. The funding reduction is a major setback for the PA, which faces constant budget shortfalls.

The Arab League’s move comes as US President Donald Trump‘s administration prepares to unveil a much-touted “deal of the century” for peace between the Palestinians and Israel in the coming months.

The Palestinian leadership, which has boycotted Washington over a series of moves including recognising the city of Jerusalem as the capital of Israel, says it can no longer trust the US as an honest broker.

Status of Jerusalem

Palestinian leaders perceive occupied East Jerusalem as the capital of their future state. The status of Jerusalem has been a sticking point in the conflict, along with the illegal expansion of Jewish settlements on Palestinian land.

The Arab League said the deal “will not succeed in achieving long-lasting and comprehensive peace in the Middle East”.

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The peace plan is being developed by Trump’s son-in-law Jared Kushner, whose close ties to right-wing Israeli Prime Minister Benjamin Netanyahu have heightened Palestinian suspicions.

Earlier this month, the Washington Post reported that the deal will likely not include a fully sovereign Palestinian state, according to sources familiar with the main elements of the proposal.

While officials have kept details of the plan secret, comments from Kushner and other US officials suggest that it “does away with statehood as the starting premise of peace efforts”, the Washington Post reported.

In 1967, Israel illegally occupied the eastern half of Jerusalem, as well as the West Bank and the Gaza Strip – and in 1980, passed a law declaring Jerusalem as the eternal and undivided capital of Israel.