The head of the Arab League Nabil al-Arabi said Sunday Arab countries would offer financial assistance to the Palestinians instead of the aid which the United States threatened to halt over a Palestinian bid for a state.

"The Arabs will assist the Palestinian Authority. This will be the strongest answer (to the U.S. threat)," al-Arabi told reporters in Cairo after talks with chief Palestinian negotiator Saeb Erekat. The United States Congress blocked nearly $200 million in aid to the Palestinians, the U.K’s Independent newspaper reported on Saturday.

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The aid, which was destined for projects related to food aid, health care, and state building efforts, was to have been transferred to the Palestinian Authority during the U.S. fiscal year that ended Friday, according to the report. However, the remainder of the aid allocated to the Palestinian Authority for the current financial year will not be transferred.

The Independent reported that the block by three Congressional committees has been in force since August 18, when it was formally notified that USAID, the U.S. government aid agency, wanted to transfer the remaining $192 million funding for the current fiscal year.

Obama’s administration is unable to commit further funding to the Palestinian Authority unless it persuades Congress to lift the freeze, according to the report.

Palestinian President Mahmoud Abbas sought recognition of a Palestinian state and full membership of the United Nations at its General Assembly in New York on September 23. The UN Security Council panel on admitting new members to the United Nations met on Friday for the first time to discuss the Palestinian bid to join the world body.

The Palestinians require nine ‘yes’ votes from the 15-member council for the provision to pass, but it can be struck down by a veto from one of the Security Council’s five permanent members. The U.S. has vowed to use its veto power as a permanent member of the council to stop the Palestinian bid.

The U.S. Congress decision to cut funding to the Palestinians was strongly condemned by the Palestinian Authority on Friday, the Independent said. Ghassan Khatib, chief spokesman for the Palestinian Authority said on Friday that, "this is not constructive at all. Such moves are unjustified,” the Independent reported.

“These are mainly humanitarian and development projects, it is another kind of collective punishment which is going to harm the needs of the public without making any positive contribution," the Independent reported him as saying.

The general consensus at the United Nations headquarters in New York is that the panel discussions over the Palestinian application for full membership will continue to deliberate over technical matters as long as the U.S., European Union and the Quartet are leading efforts to renew negotiations between Israel and the Palestinian Authority.