U.S. aid to Palestinians to total $550 million: official

WASHINGTON (Reuters) - The U.S. government will provide $550 million in direct financial support to the Palestinian Territories in 2008 and aims to leverage more in private investment funds to help spur the Palestinian economy, a senior U.S. Treasury official said on Wednesday.

In remarks prepared for delivery to the Palestine Investment Conference in Bethlehem, Deputy Treasury Secretary Robert Kimmitt said $150 million has already been transferred as budget support to the Palestinian Authority.

The United States also has pledged to provide $148 million in humanitarian aid through the United Nations, and is "requesting significant levels of assistance from Congress for next year," Kimmitt said in remarks released in Washington.

Kimmitt said much of the other direct U.S. funding will be channeled through the U.S. Agency for International Development to bolster private sector growth. "Agribusiness partnerships, microfinance assistance, modernizing financial institutions, and a new trade facilitation program are only a few of the several important initiatives that USAID is undertaking."

Kimmitt said the mid- to long-term goal was to catalyze private investment flows to promote broad, sustainable growth.

He highlighted a $500 million mortgage lending facility for the West Bank, which aimed to boost the local housing sector.

The facility was being supported by the U.S. Overseas Private Investment Corp, Britain's Department for International Development, the World Bank's International Finance Corp, the Palestine Investment Fund and the Bank of Palestine.

Another key project is a Palestinian-, American-, and European-funded $228 million loan guarantee facility to help encourage banks to lend to small and medium-sized Palestinian enterprises. These firms make up 90 percent of the local private sector, Kimmitt said.

"These small and medium-sized businesses, if properly stimulated, could create tens of thousands of sustainable jobs -- a critical requirement for fostering stability," he said.

(Reporting by David Lawder; Editing by James Dalgleish)