The United States has quietly unblocked almost $500 million in aid to the Palestinian Authority which had been frozen by Congress for months, a top US official said Friday.
The news that the funds had finally been freed up came after US President Barack Obama met top Israeli and Palestinian leaders in a landmark visit to Israel and the West Bank earlier this week.
"To date, we have moved $295.7 million in fiscal year 2012 money... and $200 million in fiscal year 2013 assistance," State Department spokeswoman Victoria Nuland told reporters.
The Obama administration also notified Congress in late February that it was seeking a further $200 million to fund US Agency for International Development (USAID) programs for the Palestinians, she said.
The first sum comprises some $195.7 million, allocated under the 2012 fiscal year budget for USAID economic, development and humanitarian assistance, as well as a further $100 million earmarked specifically for narcotics control.
The second sum of $200 million unblocked and available to the Palestinian Authority will come under the 2013 budget and be spent for direct budget support.
The Palestinian Authority is facing its worst economic crisis in years, in part because of a failure by donors to deliver pledged funds. But its finances were plunged further into chaos after president Mahmud Abbas won upgraded UN observer status at the UN General Assembly in late November.
Congress froze the US administration's requests for funds.
And Israel, which also strongly opposed the move, said it was suspending monthly transfers of the tax and tariff revenue it collects on behalf of the Palestinian Authority (PA) in the wake of the decision.
It did, however, transfer $100 million in a one-off payment in late January.
Earlier this month a report by the Palestinian Authority urged the world to step up financial aid and press Israel to allow economic development, warning of a "political collapse" due to Israeli fiscal strangulation.
Obama met Abbas in Ramallah in the West Bank on Thursday as part of his visit to Israel and the Palestinian territories, accompanied by US Secretary of State John Kerry.
Kerry has pushed for the funds to be released since taking up his post on February 1.