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Sweden will stop funding the United Nations refugee agency for Palestinians (UNRWA) and will instead increase its aid to Gaza via other groups, the Nordic country announced on Friday. 

Funding earmarked for Gaza will total 800 million kronor ($72 million) in 2025, but aid to UNRWA, which totalled 451 million kronor in 2024, will be stopped, said the government.

The move comes after Israel passed legislation to bar UNRWA from operating in Israel and east Jerusalem starting from late January, while raising the prospect of similar measures against other aid agencies.

"Israel's two decisions in the Knesset, which Sweden has criticised, will make many of UNRWA's activities more difficult and impossible," Benjamin Dousa, Minister for International Development Cooperation, said in a post to X.

Israeli authorities accused the agency’s employees of having ties with Hamas, but they did not provide any supporting evidence to back their allegations.

UNRWA provides assistance to nearly six million Palestinian refugees across Gaza, the West Bank, Lebanon, Jordan and Syria.

"Swedish aid must reach its destination, not get stuck in a bank account along the way," Dousa said.

"Due to Israel's decision in the Knesset, we are therefore forced to pass on the aid to other organisations," he added, citing the UN's World Food Programme (WFP) and UN children's organisation UNICEF.

Dousa added that UNRWA was "also going through a crisis of confidence".

UNRWA chief Philippe Lazzarini said on X that the Swedish government's decision was "disappointing" and came "at the worst time for Palestine Refugees".

"This is a sad day for Palestine Refugees and the multilateral system which Sweden has spearheaded," he added.

Lazzarini said he hoped Stockholm would "reconsider its decision and pursue its longstanding solidarity by investing in both a political solution and the human development of Palestine Refugees through UNRWA".

The agency has faced criticism from Israeli officials that has escalated since the start of the war in Gaza that has killed at least 45,129 Palestinians.

In response, UNRWA accused Israel of running ‘a global disinformation campaign’ after images of a masked man wearing its logo in the colours of Hamas began appearing on billboards near its headquarters in New York and Times Square.

The agency said the move was part of Israel’s ‘global effort by a UN member state to label a UN agency as a terror organisation’ that ‘may amount to hate speech’.