Aid from Arab countries to the Hamas-led Palestinian government had been held up as regional and international banks were balking at transferring the funds under pressure from governmental opponents, a Palestinian official said on Saturday.

"There are warnings to the banks in order not to deal with the money coming to the Palestinian people and the Palestinian National Authority (PNA)," Nabil Amr, a top adviser to Palestinian leader Mahmoud Abbas told a press conference.

At last month's summit in Khartoum, the Arab League agreed to provide aid to the cash-strapped PNA, and now the funds had reached the Arab League but their transfer had been blocked by banks for fear of possible sanctions, Amr said.

U.S. officials had said the Bush administration could take action against financial institutions that help provide money or services directly to the new government led by Hamas, which has been listed a "terrorist" organisation by the U.S. government.

Palestinian officials said some regional banks, which rely heavily on "correspondent" financial institutions in the United States to conduct day-to-day transactions, were concerned that Washington would put pressure on Wall Street banks to sever these correspondent ties if they helped transfer funds to the PNA.

The Palestinian government led by Hamas, a political force committed to Israel's destruction which won a surprising victory in the Jan. 25 legislative elections, is faced with a formidable financial crisis as the United States, the European Union and other countries cut off their financial aid to it.

Additional pressure was put on Hamas after Israel froze monthly transfers of some 50 million U.S. dollars in tax payment to the Palestinian government in a bid to force change to Hamas hardline positions.

Despite the crisis, Hamas Prime Minister Ismail Haneya has vowed not to bend to international pressures, saying the Palestinians are willing to eat salt, thymes and olives rather than kneeling for money.

According to Palestinian official estimation, the PNA under Hamas suffers a budget shortage of up to 800 million dollars.