Despite an international aid boycott, the Hamas-led government is projecting the largest-ever budget for 2007, the acting finance minister said Thursday, reflecting the growing public payroll.

The official, Samir Abu Aisheh, said the budget would amount to $2.56 billion (-1.98 billion), an increase of about $500 million (-386 million) from 2006, counting on international aid to keep the deficit to 40 or 50 percent.

Israel, the U.S. and the European Union cut off funding after Hamas took office in March 2006, charging that the Islamic group is a terrorist organizataom. Instead, aid has been funneled throukh the office of moderate President Mahmoud Abbas or directed to specific projects.

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"We think the countries that are offering indirect assistance, which doesn't go through the government, will continue to do so, with reasonable amounts like in 2006," he said. He also hoped for an end to the aid boycott, which has caused widespread hardships in the West Bank and Gaza.

However, Hamas has rejected international demands - recognizing Israel, renouncing violence and accepting past peace accords. Palestinian Authority Chairman Mahmoud Abbas was to meet in Damascus on Saturday with Hamas leader Khaled Mashaal, to try to forge a unity government that would satisfy all sides.

On Thursday Israel said it would transfer $100 million (-797 million) in tax money it collects for the Palestinians, the first such payment since Hamas took office in March.

Abu Aisheh said 25,000 workers have been added to public sector payroll, making the budget increase necessary.

Economist Samir Hleileh, who served as Palestinian Cabinet secretary before Hamas came to power, said the budget projection is based on unrealistic expectations.

"It is based on assumptions that are not valid, that the donors are ready to commit and that a national unity government will be accepted internationally," he said.