Israel's cabinet voted Monday to maintain its freeze on tax revenue transfers to the Palestinian Authority.
The decision was taken contrary to recent reports in PA affiliated media sources that the two-week freeze would be short-lived.
Israel transfers some $100 million in tax payments to the PA every month, but an eight-minister forum decided to withhold funds from Ramallah following the PA's admission to UNESCO in October.
Defense Minister Ehud Barak is against the move and has stressed in private talks that withholding funds will compromise the PA's ability to pay security forces working to thwart terror attacks in Judea and Samaria.
Barak and officials in the defense establishment pressured the government to release the funds.
Barak also reportedly supported the Obama administration, which pressured US lawmakers to unfreeze about $200 million in foreign aid dollars to the PA.
Finance Minister Yuval Steinitz, a long-time advocate of the tax revenue transfer, maintains PA unilateral steps at the United Nations must be answered firmly.
Tax revenue transfers to the PA are directly linked to the bilateral 1993 Oslo Accords, which expressly proscribe unilateral steps.
Senior financial officials for the PA have said, amid the Arab Spring revolts and the failure of Arab governments to meet their aid pledges, that the PA is on the brink of fiscal ruin.
Both US and Israel fund transfers to Ramallah are broadly viewed as critical to PA survival.