The Palestinian Authority will reject all aid from the US government from the end of January in a bid to avoid lawsuits under new American anti-terrorism legislation.
The end to American funding means the PA will not be able to be sued under the US Anti-Terrorism Clarification Act. The law, passed by Congress last year, dictates that foreign organisations that receive American funding be subject to US counterterrorism laws.
"The government sent an official letter to the US administration requesting it stop all aid to the Palestinian Authority, including assistance to the Palestinian security services," PLO secretary general Saeb Erekat told AFP.
The families of American victims of Palestinian attacks in Israel, occupied Jerusalem or the occupied West Bank could sue the Palestinian Authority, which maintains limited self-rule in the last, for alleged support of violence.
The PA has faced criticism from Israel’s hard-right government and the pro-Israeli US government for paying families of jailed attackers or those killed in attacks. But officials in Ramallah say the payments are a form of welfare to the families who have lost their main breadwinner and denies it is seeking to encourage violence.
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US President Donald Trump had already pledged to cut almost all humanitarian aid to the Palestinians, who froze contact with the White House after its declaration of Jerusalem as Israel's capital in December 2017.
Palestinian leaders accuse Mr Trump of seeking to blackmail them into accepting the terms of a peace plan his administration has been working on that they believe will be blatantly biased in favour of Israel.
Due to the Palestinians' decision to refuse remaining aid, the planned expansion of a school near Bethlehem will now not be completed, while infrastructure projects in Jericho and other towns will also stop.
The US also is scheduled to provide $35 million (Dh128.5m) in annual support for the Palestinian security services in the coming years, including to help security co-ordination with Israel that Israeli officials say is crucial for maintaining calm in the occupied West Bank.