Left to right, Israel s Finance Minister Avigdor Liberman, former Prime Minister Naftali Bennett and caretaker Prime Minister Yair Lapid, attend a cabinet meeting in Jerusalem, Sunday, July 31, 2022. AP
The sum withheld, around 600 million shekels ($176 million), would balance the amount the PA paid to assailants' families last year, under legislation dating back to 2018.
Israel collects around $190 million a month in customs duties levied on goods destined for Palestinian markets that transit through Israeli ports, and it transfers the funds to the PA.
When Israel began implementing the law in 2019, the Palestinians in protest refused to receive all funds for eight months.
Israel alleges the payments to families of those who carried out attacks encourage further violence.
The PA, for its part, says the payments are a form of welfare to families who lost their main breadwinner.
An Israeli official told AFP the ministers in Israel's so-called "security cabinet" approved keeping the freeze in place.
The move prompted senior PA official Hussein Al Sheikh to accuse Israel of "money piracy".
Israel's "policy of financial blockade and steal(-ing) our money" would add "to the daily escalation in our cities, villages and camps", he tweeted.