JERUSALEM - UN aid groups are asking for a record $450 million to staunch a deepening Palestinian humanitarian crisis, saying Wednesday that international sanctions and Israel limits on Gaza exports have devastated the Palestinian economy.

Palestinian men walk next to a section of the separation wall between Jerusalem and the West Bank town of Bethlehem, Wednesday Dec. 6, 2006. [AP]

Despite that gloomy assessment, a top minister in the Hamas-led government offered a rare upbeat economic picture Wednesday, saying increased aid from Arab countries had allowed the government to stay afloat. But independent economists and analysts said the government was still deep in crisis.

The United Nations' huge aid appeal came as poverty exploded throughout Gaza and the West Bank. The UN will officially launch its appeal Thursday, but The Associated Press obtained an advance copy of the report.

According to the UN, 65 per cent of Palestinians were living in poverty and 29 per cent were unemployed. The Palestinian health care system was running out of medicine and on the verge of collapse, and nearly 50 per cent of Palestinians did not have reliable access to food.

"Under the current circumstances, poverty levels keep continuing to rise," said David Shearer, Gaza and West Bank head of the UN's Office for the Coordination of Humanitarian Affairs.

About three-quarters of the $453 million being requested is earmarked for job creation, cash assistance and food aid, Shearer said. The UN is also asking for money to support the faltering health and education systems.

Much of the economic damage stems from the international boycott that Israel and Western nations imposed on the Palestinian Authority after the militant Islamic Hamas won parliamentary elections and took office in March.

The boycott has left the Palestinian government unable to pay full salaries to its 165,000 workers, who make up the backbone of the Palestinian economy.

Israeli limits on exports from the impoverished Gaza Strip and increased restrictions on movement across the West Bank have also damaged the economy, Shearer said.

1

2