Palestinian Authority Prime Minister Salam Fayyad on Monday downplayed fears his government would collapse without donor aid.

The Ramallah premier said the PA's efforts to build state institutions over the last three years had contributed to significantly reducing the government's dependence on foreign aid.

"We have become a state that is capable of providing services to citizens with higher and and more advanced quality than independent states do. This has been admitted by all," Fayyad said at a ceremony to honor staff of the Ministry of Public Works.

"What was seen as impossible has become true," he added.

"Since the establishment of the Palestinian National Authority until today there are analyses claiming that it would collapse without foreign aid," Fayyad said, adding that such claims were unnecessary.

The US Congress in August blocked nearly $200 million in aid for the PA in response to President Mahmoud Abbas' request to join the UN.

The decision was not made public until October, although US officials had warned that American aid could be withdrawn if Abbas followed through on the bid. On Sept. 23, Abbas handed a request to join the UN to Secretary-General Ban Ki-moon.

Responding to US threats to cut aid to the PA in September, Monetary Authority Governor Jihad al-Wazir told Reuters that the risk of a PA collapse was "very real" without US assistance.

Al-Wazir, who oversees operations in the West Bank and Gaza, was skeptical that Arab countries would make up the shortfall.

"I think it will be highly, very difficult at this stage, because Arab support also hasn't been forthcoming as much as it should have when it comes to budget support."