A $3m grant has been allocated to fund the initiative, which will enhance the Palestinian Authority’s expenditure controls, financial accountability and procurement management.

The move will help to encourage private sector participation in the delivery of public services in the struggling Palestinian economy, the bank said.

The bank has also allocated $13m to the Innovative Private Sector Development Project which will support start-ups with access to training and credit.

Both initiatives aim to help boost the digital economy and mobilise resources for development in the Palestinian territories.

Marina Wes, World Bank country director for West Bank and Gaza, said: “The project will mobilise domestic resources for development by enhancing private sector confidence in the public sector’s payment and procurement procedures, necessary for a greater private sector investment, especially in sectors where the Palestinian Authority remains a dominant purchaser – such as energy generation.”

The project aims to improve the management of budget expenditures and controls as well as to strengthen the accountability of the public finances, and includes an effort to align accounting and reporting with international standards.

It is hoped that the project will also help to improve public services in the country, by giving new and small firms a chance to bid for government business.

The PFM project will be co-financed by the European Union and Denmark, the World Bank said in a statement.

There is a lack of progress towards peace and reconciliation in West Bank and Gaza and donor support has declined, creating unsustainable economic conditions, the World Bank added.