Ramallah - The Palestinian National Authority will receive a transfer of 1.5 billion shekels ($430 million) from Israel, officials from the two governments said Friday, in a step towards resolving a months-long standoff between them.

The Israeli regime will continue to deduct money from the transfers to account for the PNA’s payments to prisoners, a decision that sparked the row, but the two sides have agreed to further talks to resolve that issue, Palestinian civil affair minister Hussain Al Shaikh said.

In February, the occupation regime decided to withhold about $10 million a month from revenues of some $190 million it collects on the PNA’s behalf, prompting Palestinian president Mahmoud Abbas to refuse all payments - saying he would accept all or nothing.

The money comes from customs duties levied on goods destined for Palestinian markets that transit through Israeli ports and constitutes more than 50 per cent of the PNA’s revenues.

The deduction corresponds to what the regime says the PNA paid Palestinian prisoners in Israeli jails, or their families.

Palestinians view prisoners as fighting against Israel’s occupation and say the money supports families that have lost their main breadwinners.

Al Shaikh said the two sides had agreed to form a committee to resolve remaining issues, including the money withheld over prisoner payments.

“This is a step towards resolving the crisis but the crisis didn’t end,” he told AFP.

The financial shortfall had been so severe the PNA has been forced to halve salaries to its tens of thousands of civil servants.