At least 700 million US dollar of funds from the Palestinian Authority's coffers have been squandered or stolen by officials over the past few years, an internal investigation has revealed.

The news comes as Israeli officials agreed on Sunday to make an overdue payment of about 45 million owed to the Palestinians, but say future transfers will be halted once Hamas forms the next Palestinian government.

Commenting on the PA squandering issue, Ahmed al-Moghani, Palestinian attorney-general, said: "There are 50 cases of financial and administrative corruption. The amount of money that was squandered and stolen is more than 700 million."

Moghani said 25 officials had been arrested so far and 10 had fled abroad. He said the Palestinian Authority was seeking their extradition.

Among the cases under investigation involved a fictitious pipe factory funded by 4 million of Palestinian Authority cash and 2 million of Italian aid money, he said.

"The factory existed only on paper and the investigation is under way to find out where the money went," Moghani said.

Hamas won the 25 January Palestinian parliamentary election by a landslide on a platform of ending corruption and mismanagement in the Palestinian Authority.

Israel froze the payment last week to protest at Hamas's election victory.

Officials said at the time they wanted assurances that the money would not be used for bombings.

PHOTO CAPTION

A Palestinian youth from Fatah sits near a poster of late Palestinian president Yasser Arafat in the rubble of a destroyed club after an Israeli air strike in Gaza City February 5, 2006. (Reuters)