Israel's extreme-right Finance Minister Bezalel Smotrich said on Monday his ministry would unblock funds for Palestinian communities that he suspended after claiming without any evidence that the money was fuelling crime.
The comments triggered outrage from Palestinian mayors and Palestinian and Jewish lawmakers.
Smotrich, a member of Prime Minister Benjamin Netanyahu's far-right government, said this month that some of the budget funds meant for Palestinian local councils were a political pay-off by the previous Israeli government that could end up in the hands of "criminals and terrorists".
Palestinian councils held a strike last week in protest and community leaders demonstrated outside government offices.
The National Committee of Arab Local Councils in Israel accused Smotrich of racism, an accusation which has been levelled at him many times before.
The extremist minister has previously claimed that Palestinians don't exist as a distinct ethnocultural people and his called for the Palestinian town of Huwara to be "erased".
In a statement on Monday, Smotrich appeared to reverse course and said an oversight mechanism had been created to transfer funds to the Palestinian communities.
"We are stopping the criminal organisations from taking over the budgets that go to the Arab authorities," Smotrich said.
Palestinian citizens of Israel, the descendants of Palestinians who remained in Israel after the 1948 war surrounding its creation, make up about a fifth of the country's population.
Crime in the Palestinian sector communities is disproportionately high and this has been blamed on discrimination by the Israeli state, with Israeli police perceived to devote much less resources to crime among Palestinians.
At least 157 Palestinian citizens in Israel have been killed since January, more than double the fatalities over the same period last year and the highest toll since 2014.
(Reuters)