Palestinian Prime Minister Salam Fayyad has appealed to the World Bank to help him secure emergency financing to bridge a shortfall in donor funds and pay public workers, Palestinian and European sources said on Tuesday.

Fayyad is seeking a so-called comfort letter from the Washington-based international lending agency to obtain short-term private bank funding, the sources said, speaking on condition of anonymity.

The unusual appeal underscores the extent of the Palestinian Authority's budget crisis despite billions of dollars in aid pledged last year to support a U.S.-backed peace drive.

The Palestinian Authority's workers are due to be paid in the first week of each month. Any delay would be embarrassing for Fayyad's Western-backed government, formed a year ago in the occupied West Bank after Hamas seized control of the Gaza Strip.

Palestinian officials expressed hope that the World Bank would provide the written assurances sought by Fayyad.

The World Bank, which manages a donor trust fund for the Palestinian Authority, said it was in "active discussions" with several donor countries to replenish the fund.

A World Bank official said the Washington-based institution had transferred $108 million of donor funds to the Palestinian Authority this year, in addition to another $40 million from the bank.

The official did not mention the guarantee but said the World Bank expected to raise $120 million for the trust fund.

The State Department said the United States had already surpassed its $555 million in pledged support for 2008 to the Palestinian Authority and urged other donors help out.

"It has been clear for some time that the Palestinian authority faced a serious and imminent budget crisis," the State Department said. "We continue to urge all donors to maximize their budgetary support for the Palestinian Authority during this critical time."

Many Arab states have not met their financial commitments despite pressure from Washington, which has sought to bolster Palestinian President Mahmoud Abbas and his negotiations with Israel by directing Western aid to Fayyad's government while denying funds to Hamas's administration in the Gaza Strip.

HAMAS PAYS GAZA WORKERS

Workers in Gaza say Hamas, which receives support from Iran and other Islamist allies, has been paying salaries on time despite the Western boycott, imposed over Hamas's refusal to recognise Israel and renounce violence after the Islamist group won 2006 parliamentary elections.

European officials said private banks have started asking for greater assurances before providing loans to Abbas's Palestinian Authority because of the uncertainty over donor funds. Fayyad could face a similar shortfall in future months unless donors pay their commitments on schedule, they added.

Palestinian Planning Minister Samir Abdallah said salary payments may be a few days late. "We have a solid commitment that this serious crisis will be solved soon," he said.

Palestinian and European sources said Fayyad asked the World Bank on Sunday for the letter to assure private banks that over $80 million in Kuwaiti money deposited in a World Bank trust fund would reach Palestinian Authority coffers by August 15.

Palestinian and Western officials said Kuwait had sent the money to the World Bank trust fund, used to help finance Palestinian Authority operations. But it takes some two weeks for money deposited with the Bank to reach the Palestinian Authority due to the lending agency's oversight procedures.

Donor countries pledged $7.7 billion to the Palestinians at a December conference in Paris aimed at supporting Abbas's peace talks with Israeli Prime Minister Ehud Olmert.

Only a fraction of that money has materialised and most of it has been earmarked for projects. This means Fayyad cannot use it to pay salaries or meet government expenses.

Abdallah said Fayyad's government, also hit by the dollar's weakness against the Israeli shekel that is used to pay Palestinian salaries, is asking donor countries to convert project financing into direct budget support.

"We cannot continue with our reform plan and economic revival without budget support," he said.