In April 2006, major donors -- including the USA, EU, and Canada -- suspended international aid to the Palestinian Authority government (PA), following the election of the Hamas party. Israel had already suspended the transfer of the tax and customs revenues it collects on behalf of the PA.

Donors and Israel stated that their actions were in response to the refusal of Hamas to recognise the state of Israel, renounce violence, and accept previous political agreements. They argued that their goal was to pressure Hamas to change its platform, not to punish the Palestinian people.

However, the decision to suspend aid to the PA and withhold revenues has led to immense suffering. One year on, the number of Palestinians living in poverty has jumped by 30 per cent; essential services are collapsing; and severe factional violence plagues Palestinian streets. Oxfam has witnessed a rapid rise in suffering and insecurity as a result of this boycott, and many of Oxfam's programmes in the water, health, and agriculture sectors are being jeopardised.

In an Oxfam survey of 677 household heads across the West Bank and Gaza, conducted in mid-March 2007, 87 per cent of people interviewed in Gaza and 81 per cent in the West Bank said that their household income had been reduced. In Gaza, 53 per cent said that their household income had fallen by more than a half, and 21 per cent said their household income had stopped altogether. Households have resorted to borrowing, selling possessions, reducing healthcare and food consumption, and taking children out of school.

If this situation continues, the Occupied Palestinian Territories risk becoming a 'failed state', destroying the chances of achieving a two-state solution. In its 'Poverty in Palestine' paper, Oxfam argues that donors and Israel should urgently resume direct financial transfers to the PA.

Following the creation of a National Unity government in Palestine, Norway has already agreed to resume financial assistance, while Russia, France, and a number of other European governments are considering financial transfers to the PA in order to improve the lives of Palestinians. It is imperative for Israel and other donors to follow suit.