Palestinian economy on verge of collapse, UN warns

GENEVA, Sep 12 (Reuters) A Western aid boycott has left the Palestinian economy ''on the verge of collapse'', with two out of three families struggling to survive below the poverty level, a United Nations report said today.

Israel's separation barrier, which led to the confiscation of almost one-fifth of West Bank's farm land and lower agricultural production, was also a factor in the decline, the UN Conference on Trade and Development (UNCTAD) said.

After Hamas assume power in March, nearly all donors suspended budgetary support and development aid to the Palestinian Authority, which amounted to 0 million in 2005 or two-thirds of total Palestinian public revenue, according to UNCTAD.

''Dwindling donor support has left the Palestinian Authority in a perilous financial position'' in terms of its financial solvency and ability to deliver services, the Geneva-based agency said in its annual report on the Palestinian people.

''Poverty continues to widen and deepen,'' it said, noting that many households had built up big debts.

UNCTAD forecast that per capita income for 2006 would be half that of pre-2000 levels, unemployment would affect half the Palestinian workforce by year-end and two out of three Palestinian households would live below the poverty line.

Its report came a day after Palestinian President Mahmoud Abbas reached a deal with Prime Minister Ismail Haniyeh of Hamas to form a unity government the Palestinians hope will end their international isolation and revive aid.

REUTERS SAM KN1845