"We have inherited an empty treasury from the previous government in addition to debts," Haneya said.

The prime minister, also a senior Hamas leader, said that the new government would do its best to pay the salaries of employees of the PNA despite the financial crisis.

Haneya made the statements at the first cabinet meeting since the Hamas-led government was sworn in on March 29. Hamas, or the Islamic Resistance Movement, defeated the dominant Fatah movement, which had long run the Palestinian government, in the January legislative elections. The group then single-handedly formed a new government.

Following the sweeping election victory of Hamas which is sworn to Israel's destruction, the Israeli government halted the monthly transfer of about 50 million U.S. dollars of tax revenues it collects on behalf of the Palestinians to the Palestinian government.

Meanwhile, the already cash-strapped Palestinian government is also facing threats by key international donors to cut off aids unless Hamas renounces violence, recognizes Israel's right to exist and accepts interim peace deals.