UNRWA is the only major UN body dedicated exclusively to one conflict and one people and holds a symbolic role that experts say matches its importance as provider for Palestinian refugees.
A proposal by the UN agency for Palestinian refugees to delegate some services to other United Nations agencies has sparked outrage among Palestinians, who have warned of a plot to "dismantle" the body.
UNRWA is "not just about the delivery of services", said Muhammed Shehada from the Swiss-based Euro-Mediterranean Human Rights Monitor on Sunday.
"As long as UNRWA is there, it's a reminder that the international community has a responsibility to solve the issue of Palestinian refugees," he told AFP news agency.
At first glance, the announcement last month by agency chief Philippe Lazzarini that UNRWA could ask other UN bodies to help with service delivery may have looked like a bland, bureaucratic cost-sharing plan.
Counting primarily "on voluntary funding from donors would not be reasonable" going forward, he said in a statement.
"One option that is currently being explored is to maximise partnerships within the broader UN system."
Palestinians saw those remarks as a potentially devastating blow to UNRWA's long-term mission.
'Attempt to dismantle UNRWA'
Palestinian prime minister Mohammad Shtayyeh said the plan would "violate" the UN resolutions that set up UNRWA, while the Palestine Liberation Organization said refugees would be outraged.
Mohammad al-Madhoun, a senior official with Hamas, which governs Gaza, described the proposal as "an attempt to dismantle UNRWA as a prelude to ending its work".
Established in 1949, a year after Israel was created, UNRWA is the only major UN body dedicated exclusively to one conflict and one people, and holds a symbolic role that experts say matches its importance as provider for Palestinian refugees.
The agency has long been a target of Israeli criticism, with accusations it has fuelled the conflict in part by teaching anti-Zionist messages at its schools.
The agency tasked with assisting Palestinians who were forced from their homes during the war surrounding Israel's creation – and their descendants – has faced a funding crunch for years, regularly falling tens of millions of dollars short of its stated needs.
With more than 30,000 employees and a budget of some $1.6 billion this year, UNRWA is a frontline provider of healthcare, education and other services to some 5.7 million Palestinian refugees spread across the Gaza Strip and the occupied West Bank as well as in Lebanon, Syria and Jordan.
Former US president Donald Trump publicly sided with Israel in blasting UNRWA and cut off its funding.
The agency has firmly defended its school curriculum against pro-Israel critics, though Lazzarini told European Union lawmakers last year that problematic issues were being "addressed".
President Joe Biden's administration has since restored funding, but Lazzarini warned in November that UNRWA was facing an "existential threat" over budget gaps.
Agency spokeswoman Tamara Alrifai told AFP that this year would see another $100 million shortfall that could worsen given "the increased cost of commodities and food that the ongoing Ukraine crisis has provoked".
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