Israel to withhold $138 million in Palestinian funds over prisoner payments

The government's security Cabinet said on Sunday that it was implementing a law passed last year allowing Israel to withhold funds used to pay stipends to Palestinian attackers and their families from taxes Israel collects on the Palestinian Authority's behalf.

Israel says the payments encourage violence - a claim the Palestinian Authority rejects.

The PA makes a variety of social payments to the relatives of Palestinians detained by Israel or killed in violence, whether they were carrying out attacks or shot dead by Israeli military forces.

A dedicated fund was set up in the 1960s and estimates suggest it distributes as much as $100 million a year.

The payments can be a key source of income for families, who have in many cases lost their main breadwinner.

Israel currently detains some 6,500 Palestinians for a range of alleged offences and crimes, with detainees considered political prisoners in Palestinian society.

As part of the Oslo Accords, Israel collects around $127 million a month in customs duties levied on goods destined for Palestinian markets that transit through Israeli ports and then transfers it to the Palestinian Authority.

Israel has withheld payments in the past, notably in response to the Palestinians' 2011 admission to the UN cultural agency UNESCO as a full member.

The freeze comes as the Palestinians face major budget cuts made last year after the United States slashed funding for the UN's Palestinian refugee program UNRWA and for development programs in the Palestinian territories.

The UN's World Food Program also cut back services due to funding shortages.

Agencies contributed to this report.