The U.S. called Wednesday for dismantling the U.N. Palestinian refugee agency (UNRWA), weeks before unveiling the economic aspects of its long-awaited Middle East peace plan.

Addressing the U.N. Security Council, U.S. adviser Jason Greenblatt said the U.N.'s Palestinian refugee program was a "band-aid" and that it was time to hand over services assured by the U.N. agency to countries hosting Palestinian refugees and NGOs.

The head of the UNRWA yesterday rejected the U.S. call, rebuffing the criticism from US envoy Jason Greenblatt during a visit to the Gaza Strip. "I unreservedly reject the accompanying narrative that suggests that somehow UNRWA is to blame for the continuation of the refugee-hood of Palestine refugees, of their growing numbers and their growing needs," he said in response to a question about Greenblatt's comments. "The fact that UNRWA still exists today is an illustration of the failure of the parties and the international community to resolve the issue politically, and one cannot deflect the attention onto a humanitarian organization," he told a press conference in Gaza City.

Last year, the U.S. slashed funding for UNRWA and for development programs in the Palestinian territories. The World Food Program (WFP) earlier announced further cuts in food aid to Palestinians due to funding shortages, amid international warnings of an ongoing humanitarian crisis in the occupied territories.

Half of the Palestinians in the blockaded Gaza Strip depend on food aid, UNRWA said earlier this month. In a statement, the agency called for providing an additional $60 million by June to help the agency provide aid to more than 1 million Palestinian refugees in Gaza. "From fewer than 80,000 Palestine refugees receiving UNRWA social assistance in Gaza in the year 2000, there are today over 1 million people who need emergency food assistance without which they cannot get through their day," it said.

UNRWA explained that there are now some 620,000 Gazans who live in abject poverty: Those who cannot cover their basic food needs and who have to survive on $1.6 per day and nearly 390,000 absolute poor.

Since 2007, the Gaza Strip has been under a crippling Israeli and Egyptian blockade that has gutted its economy and deprived its roughly 2 million inhabitants of many vital commodities, including food, fuel and medicine. In the long-embargoed enclave, the humanitarian situation gets worse each day.

Last September, the World Bank warned that the Gaza economy was in "free fall," calling on Israel and the international community to take immediate action to avoid an "immediate collapse" in the Palestinian territory. According to the bank, unemployment is now over 50% and over 70% among Gaza's youth. The poverty rate in the Gaza Strip has reached 80% amid more than a decade-long Israeli blockade, according to the Palestinian General Federation of Trade Unions. Dozens of Palestinians have long demonstrated against high unemployment rates in the Gaza Strip, which has been reeling under the crippling Israeli blockade.