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Israel transferred $118 million in tax revenues to the Palestinian government yesterday, as part of a series of steps intended to bolster Palestinian Authority Chairman Mahmoud Abbas.

The remainder of the tax revenues, collected by Israel on behalf of the Palestinians, will be transferred to Abbas' government within six months, as was agreed in meetings last week between Prime Minister Ehud Olmert's aides and Abbas.

Palestinian officials estimate that Israel is withholding a total of some $600 million in tax revenues. Israel halted the transfer of the funds on February 1, 2006 after Hamas won the Palestinian legislative elections.

The tax revenues were transferred to the emergency government established by Abbas in the West Bank, following Hamas' violent takeover of the Gaza Strip in June.

Palestinian officials said the money was essential because Palestinian Prime Minister Salam Fayad, who also is the finance minister, has pledged to pay workers' salaries this week.

Officials said Fayad intends to pay government employees in the Gaza Strip as well, thus underscoring Abbas' claim to represent all Palestinians.

In Gaza, Hamas spokesman Ghazi Hamad said the money is not a gift or a favor from Israel.

"I think it should be paid without any conditions and without conferences," he said.

"Everything that needed to be agreed upon has been agreed," a senior Israeli official said, after a meeting during which the payment schedule was decided upon. "From July 1, there will be automatic transfers of the tax money," he added.