Large Arab investment funds will funnel about $50 million into projects to ease the hardships of the Palestinians but the money will not go to the cash-strapped Hamas-led government, fund heads said on Wednesday.  And the Arab states of Qatar and Saudi Arabia will contribute another $100 million.

"We agreed to allocate 10 percent of 2005’s net profits of the funds to aid the Palestinian population," Jasem al Manai, the managing director of the Arab Monetary Fund (AMF), told Reuters.

The AMF and four other Arab funds wrapped up a two-day annual meeting in Rabat with the decision to participate in an Arab drive to bail out the Palestinians, who have been suffering from aid freezes by the U.S., European Union and others after the January election of the Hamas party.

The Hamas-led Palestinian government inherited $1.3 billion in debt. Israel has cut off $55 million in monthly tax transfers while the United States and the European Union have cut aid to the government unless it recognizes Israel and disbands its military wing.

Banks are refusing to deal with the Palestinian Authority, fearing lawsuits by Washington which has prohibited any commercial dealings with Hamas government.

"The financial aid from the funds will go through no Palestinian government channels. It will benefit directly the population as it will finance health and education projects as well as urgent needs of the poor people," Manai said.

"The board of governors agreed to set aside 10 percent of its 2005’s net profits and allocate that amount to the benefit of the Palestinian people," said the Arab Fund for Economic and Social Development in a statement.

Officials from other funds made similar remarks.

Manai said the funds will coordinate their relief efforts to avoid duplication and ensure an efficient use of the aid.

"The aid money from the funds will not resolve the Palestinian sufferings but it will help ease their hardships. The Palestinians are facing a crisis because of the financial siege," he added.

The Inter-Arab Investment Guarantee Corporation, which attended the two-day meeting, is not involved in the decision to allocate part of profits to Palestinian aid as its statue prevents it from doing so.

But Fahad al Ibrahim, the director general of the investment body, said his corporation was aiding Palestinians in its own way and will continue to do so.

"We asked the Palestinians to specify their needs and we are ready to help them with things like training staff or providing some office equipment," he told Reuters.

The funds were set up by Arab states to promote trade, investment and other economic cooperation within the Arab world in the hope of building a common market sometime in the future.

Finance ministers and central bank governors from 20 Arab states attended the annual meeting of the funds, during which they discussed the region’s economic outlook and cooperation.

*this article was sourced from the Associated Press and other reports