The European Bank for Reconstruction and Development is to start investing in the West Bank and Gaza, it said yesterday. The development bank's shareholder governments approved the move which will initially last for five year and be financed with donations pooled from individual countries. It is expected to concentrate on energy infrastructure, renewable energy and supporting private businesses.

"The EBRD can make an important contribution to the economy alongside other international financial institutions," the EBRD's President Suma Chakrabarti at the bank's annual meeting. Chakrabarti said Israel, which is also an EBRD shareholder, had supported the move.

Speaking to Reuters, Azzam Shawwa, governor of the soon-to-be-formalised Palestinian central bank, said the EBRD's financing model and policy advice would be the main benefit.

"The whole concept took long enough but it's good that we made it and that the EBRD and others are moving into Palestine," Shawwa said. "It is going to be something that is really supportive to the economy."