Palestinian prime minister Salam Fayyad on Tuesday announced cuts to fuel prices and VAT after more than a week of protests across the West Bank over the spiralling cost of living.
The price of fuel "will be returned to what it was in late August, starting tomorrow," Fayyad told reporters after the weekly cabinet meeting.
"We will reduce the VAT to 15 percent, which is the minimum available to us at the moment," he added.
The measures were announced as hundreds of bureaucrats gathered in front of Fayyad's office for new protests over the cost of living, a day after a mass strike by transport workers that paralysed much of the West Bank.
Fayyad said government workers would be paid part of their overdue August salaries on Wednesday, and would receive the rest later in the week.
"There will be additional cuts made to the expenses of ministries and government institutions with the exception the ministries of health, education and social affairs," he said.
There would also be cuts to the salaries and expenses of high-ranking officials and ministers, he said.
"We will not commit to any new ministerial expenses for travel, rent, transportation or fuel until we get through this financial crisis."
Palestinians in the West Bank have been demonstrating for the past 10 days over the cost of living, and particularly the price of fuel, which has risen from six to eight shekels (from $1.50 to $2.00/1.18 to 1.57 euros) per litre in the past two months alone.
Much public anger has focused on Fayyad and the policies of his government, with about 1,500 demonstrators joining Tuesday's sit-in outside his office.
"Our demand is for an immediate reduction in the cost of fuel," union head Bassam Zakarneh told demonstrators.
"We are not calling for the departure of Fayyad himself, but for the end of his economic policy," he added, calling for a 30 percent reduction in fuel prices.
Abbas's West Bank government has struggled to respond to public frustration, although it has approached Israel for talks to amend the Paris Protocol, a key accord which has a direct impact on local taxes and fuel prices.
The 1994 agreement governs Israel's transfers of tax revenue to the Palestinians and sets limits on the difference in fuel prices applicable in Israel and the Palestinian territories.
It sets Palestinian VAT at between 15 and 16 percent, and puts the maximum difference between Palestinian and Israeli fuel prices at 15 percent.
Last year, Abbas pledged to change the agreement which he branded as "unfair."
The Palestinian Authority is facing its worst economic crisis in years, largely because of a failure by donors to deliver pledged funds.
The crisis has left the Ramallah administration unable to fully pay tens of thousands of government workers.