The Palestinian Authority will pay its employees' salaries in full in August but still faces a financial crisis which forced it to pay only half wages in July, Prime Minister Salam Fayyad said on Sunday.

Earlier on Sunday, the head of the public sector workers' union had raised the prospect of a strike in protest at the wage cuts. The union was due to meet on Monday to take a decision on possible industrial action.

Open gallery view Palestinian Authority Prime Minister Salam Fayyad. Credit: AP

Fayyad, who is also finance minister, said he expected full salaries to be paid on Tuesday.

"In view of the continued financial difficulties, payment of the salaries in full will greatly limit the ability of the PA to meet other needs during the coming month," he said in a statement, without going into details.

Fayyad has blamed a fall in aid from Arab states for largely causing the financial crisis. The PA continued to seek the foreign aid needed to overcome the problem, he said on Sunday.

The PA relies on help from foreign states to pay the salaries of about 150,000 Palestinians in the West Bank and Gaza Strip and monthly allowances to another 75,000 people.

The PA needs aid of e970 million to fill a gap in its 2011 budget. As of July 3, it had received only $331 million.