RAMALLAH, June 20 (Xinhua) -- Palestinian officials warn that the financial situation of the Palestinian Authority (PA) is facing the risk of collapse due to the crisis of tax revenues with Israel and the decline of donor countries.

The financial crisis now is the most serious in PA's history, especially as it pushed PA's financial debts to the amount of 3 billion U.S. dollars.

This comes in light of the unprecedented contraction of the Palestinian economy, as well as the economic deterioration due to the decline of international projects and the suspension of projects funded by the United States of America.

The PA has been facing a severe financial crisis since Israel's decision to deduct funds from Palestinian tax revenues, on the pretext that the PA pays financial dues to the families of killed Palestinians and prisoners in Israeli jails.

Originally, Israel deducted 3 percent of the total tax worth over 1 billion dollars a year. In February, Israel began to deduct about 10 million dollars in tax revenues collected for the PA.

The PA has refused to receive any amount of tax revenues from Israel, and has so far maintained its position that the funds must be transferred in full amount.

The Palestinian government was forced to borrow from local banks to continue paying 50 percent of the public servants' salaries, while the total salary bill was more than 200 million dollars per month.

The head of Palestinian monetary authority Azzam Shawwa said that the Palestinian banking system is strong and safe and is still able to deal with the Palestinian financial crisis.

However, in statements made to the official Palestinian news agency WAFA, Shawwa called on the international community and the Arab countries to honor their commitments to the PA to overcome the financial crisis, pointing out that it is worsening day by day.

Hussein Al-Shaikh, a member of the Central Committee of Abbas' Fatah party, said that the financial siege "intensifies" on the PA under its boycott of the U.S. administration and its rejection of the initiative of "Deal of the Century" that Washington is making peace with Israel.

Officials in the PA said that the crisis lies in the limited alternatives to fill the deficit in the budget after the cessation of U.S. aid and the decline of international aid to it, which worsen the serious consequences of the Israeli decision on tax funds.

Palestinian businessmen inside and outside the Palestinian territories have announced an initiative to grant the Palestinian government a concessional loan of 150 million dollars over the next three months.

The Palestinian businessman Munib al-Masri told Xinhua that the initiative, which involves 70 Palestinian businessmen, aimed to emphasize that the private sector is supporting the position of the Palestinian leadership, in order to meet its financial obligations.

Al-Masri explained that the loan will be implemented by the end of August at a rate of three percent.

For his part, Palestinian government spokesman Ibrahim Melhem told Xinhua that the initiative will enable the government to pay its financial obligations, especially the payment of the salaries of public officials.

Melhem suggested more communication with the international community and the Arab countries to provide a financial safety framework for Palestine.

The economic analyst from the West Bank, Haitham Daraghmeh, said that since the establishment of the PA, it has relied on foreign aid and tax revenues mainly for its budget and financial obligations.

"The local revenue, which accounts for 30 percent of the Palestinian budget, has also fallen as a result of the lack of payment of government salaries which led to a weak purchasing power in the Palestinian markets and hence further decrease in revenues," Daraghmeh said.

Because of different positions of the Arab countries, the Palestinian government has to take more fiscal austerity steps to ease economic deterioration.

On June 23, Arab finance ministers are scheduled to hold a meeting at the headquarters of the Arab League in the Egyptian capital Cairo, on a Palestinian request to discuss the financial crisis of the PA and its risks.