Prime Minister Ismail Haniyeh told the first full meeting of his Hamas-led government today that the Palestinian Authority's treasury was empty.
"The Ministry of Finance has inherited an entirely empty treasury in addition to the debts of the ministry and the government in general," Mr Haniyeh said.
He said the government would do its best to pay salaries to the Authority's 140,000 employees despite a cash crunch caused in large part by cuts in Israeli tax revenue transfers since Hamas won elections in January.
Last night, US Secretary of State Condoleezza Rice said the United States wants to increase humanitarian assistance to Palestinians and help them control an outbreak of bird flu even though it will not give aid to a Hamas-led government.
US Secretary of State Condoleezza Rice
Ms Rice told a congressional budget hearing in Washington she is close to concluding a review of US aid to Palestinians as she seeks to balance efforts to prevent suffering among Palestinians while avoiding any US dealings with Hamas, which Washington considers a terrorist group despite having won a parliamentary election in January.
"One thing we are reviewing is how we can even increase our humanitarian assistance because we don't want to send a negative message to the Palestinian people about their humanitarian needs," Ms Rice said.
The United States hopes to isolate Hamas and pressure it to recognize Israel, renounce violence and abide by peace accords. So far the Islamic militant group has refused, although its leaders have said they would continue to observe a ceasefire with Israel.
The United States has banned its officials and contractors from having contact with Palestinian ministries after a Hamas-led government was sworn in late last.
The order could complicate Ms Rice's plan to help Palestinians combat the deadly bird flu virus, which has spread from Asia to the Middle East, Europe and Africa in recent months.
It was not immediately clear if she would make an exception to allow some US coordination over bird flu with Palestinian officials in a Hamas-led government.
"I can assure you that we are doing everything that we can to avoid any assistance to the Palestinian government that is Hamas-led," she said. "I might note that the only time that emergency situations - for instance we are dealing right now with an avian flu outbreak in the Palestinian territories. I think we will want to do whatever is necessary to deal with that avian flu outbreak."
In Israel, which has taken the same no-contact policy with Hamas as the United States, health and agriculture officials initially had coordinated over bird flu with low-level Palestinian officials. But this week Israel decided such coordination should be done only through UN agencies or non-governmental groups.
Mostly through such groups, the United States has given $1.5 billion in aid to the Palestinians in the last decade. The Bush administration has also given some financial assistance directly to the Palestinian Authority.
Before Hamas won the January election, the Bush administration had decided to request $150 million from Congress for this year's budget for the Palestinians, to be given in direct aid to the government and humanitarian assistance. But after the election, Ms Rice said the administration would review its plans.