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Israel has told the Palestinian Authority that it will release $49 million in tax and customs transfers it has withheld in the wake of Islamic militant suicide bombings, a senior Palestinian official said today.

Negotiator Nabil Shaath told reporters after resumption of Israeli-Palestinian talks on economic cooperation that Israel would hand over the money.

His Israeli counterpart at the talks, Treasury director-general Shmuel Slavin, said the transfer was a "political issue" and had not been discussed at their meeting, the first of its kind since peacemaking ground to a halt in March.

Israeli government officials were also not available to comment, but diplomatic sources said earlier that the government was considering ending the freeze.

The sources said Israel was also expected to take further steps next week to ease a closure of the West Bank and Gaza Strip that has prevented thousands of Palestinian workers from entering the Jewish state.

Both steps, the sources said, would reflect action taken by the Palestinian Authority to improve security and a more positive climate following a snap summit on Wednesday between Israeli Prime Minister Benjamin Netanyahu and Palestinian President Yasser Arafat.

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