US-supported Palestinian Authority President Mahmoud Abbas has approved $5 billion in US-funded aid to help rebuild Gaza’s devastated economy.

The $5bn package will help Gaza, the world’s poorest country, with the biggest reconstruction project in its history, and it will also give Israel an opportunity to take action on the Palestinian Authority’s stalled peace negotiations with Israel.

The announcement on Monday follows months of negotiations that have been marred by conflict and Israel’s occupation of the territory.

Israel is building a new Jewish settlement in the West Bank and is seeking to annex parts of the Gaza Strip in a move it says would help secure its borders.

Palestinian President Mahmoud Ahmadinejad has said that the US aid is an “important contribution” and said he was proud of its work.

The Palestinian Authority has long been a thorn in the side of US President Donald Trump, whose administration has long opposed the construction of settlements in the occupied Palestinian territory.

Abbas and US Secretary of State Rex Tillerson met on Saturday in Washington.

He said they agreed on the need to increase aid and urged the international community to support Israel and help Palestinian refugees.

The US-led International Monetary Fund (IMF) has said it would help ease economic strains in Gaza and help Palestinians rebuild.

The aid package is part of the $1.1 trillion aid package Israel is expected to receive from the US next month.

Israel has said the money will help rebuild the devastated economy of Gaza after a devastating seven-year conflict that has left more than 2,000 Palestinians dead.

The Palestinians have long demanded that the West bank and East Jerusalem be annexed, but this was considered illegal under international law.

Abbott, who is due to visit Israel on Wednesday, said the $5-billion aid package will “address the immediate needs of the people of Gaza”.

“This package is the largest and most comprehensive US-Israel aid package to date and will be a significant and positive contribution to our efforts to rebuild the Gaza economy,” Abbott said in a statement.

Abu Mazen, the PA’s foreign minister, said in his statement: “This is an important contribution to the reconstruction of Gaza.

The PA will continue to work towards securing a lasting peace and a two-state solution in the Palestinian territories.

The PA has long called for the construction and occupation of an independent Palestinian state and an independent state of Palestine in the land occupied by Israel since 1967.

We are confident that the money allocated to rebuild Gaza will make a meaningful contribution to achieving this objective.”

Abbas’s government has been under heavy international pressure to halt construction of new settlements in Gaza since Trump was elected in November.

The Palestinian Authority says the new settlement blocks are illegal under the terms of a landmark UN-backed 2012 peace deal.

The Trump administration has not said whether it will veto the funding package.

Abduljabbar Abed Rabbo, an adviser to Abbas, said on Twitter that the PA was “happy that the United States has approved our proposal to assist in the reconstruction” of Gaza, which is suffering from an economic and social crisis.

“I want to thank the US administration and our international partners for their support,” he added.

Abed Rabdo said the PA would continue to push for a two state solution with the Palestinians.

The two-states proposal was a key plank in the peace talks between Israel and the Palestinians in the early 2000s.

But the US-mediated deal between Israel, the Palestinians and the US, known as the Oslo Accords, collapsed in 2018 after Israel withdrew its military from Gaza.

Israel and Hamas, the Palestinian group that governs the Gaza strip, still control large parts of it.US Secretary of Commerce Wilbur Ross said on Saturday the aid package would not affect the pace of the two-year process to restart stalled peace talks with Israel, which have been suspended since November.

Ross said he expected that talks to restart would resume next year.