BETHLEHEM (Ma'an) -- The Palestinian Authority finance minister warned on Sunday that if the government's fragile financial situation persists, the peace process between Israel and Palestinians is at risk.

Nabil Kassis was addressing a meeting of donors to the PA, the Ad-Hoc Liaison Committee, in New York.

The Palestinian Authority says that shortfalls in foreign aid pledges are compounding its financial crisis. The World Bank and International Monetary Fund both urged immediate donor action in their reports to the meeting, as well as the lifting of Israeli restrictions which harm economic growth.

Kassis told the meeting that financial problems would undermine the sustainability of a Palestinian government, social cohesion and a sense of security in Palestine. Recent weeks saw mass strikes and rallies across the West Bank protesting the rising cost of living, that increasingly focused on criticism of the government.

"No doubt, if the status quo is allowed to persist, it will have dire consequences to the international enterprise of peace making in the Middle East," Kassis said.

He stressed that Israel's stranglehold on the 60 percent of the West Bank designated 'Area C' in the Oslo Accords blocks any possibility to implement economic development.

"The greater part of Palestinian lands is being gradually emptied of its Palestinian inhabitants in order to provide room for more colonization by Israel," he said.

"Israeli restrictive measures which bar freedom of movement and access to all Palestinian areas, including East Jerusalem, are still preventing Palestinians from realizing their full development potential," the minister continued.

"Continued financial support by the donor community, combined with sustained efforts by the PNA and necessarily augmented with tangible roll-back of Israeli occupation, is the only way out of the fiscal crisis."

The meeting of 27 donor nations, global financial institutions, and the Quartet of Mideast peace negotiators was also attended by Israel's Deputy Foreign Minister Danny Ayalon and the head of the IDF's defense department in charge of West Bank civil affairs.

The Israeli officials outlined steps they have taken to ease restriction on the Palestinian economy, including advancing tax revenues in collects on the PA's behalf, increasing permits for Palestinians to work inside Israel, and pledging to ease import and export restrictions on the Gaza Strip, Israeli daily Haaretz reported.

But Ayalon warned "the more the Authority uses this assistance for funding terror, and continues the unilateral steps, the more this cooperation is in danger," settler news site Arutz Sheva reported.