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A Palestinian released from an Israeli jail is is hugged by a relative after crossing into the Gaza Strip, following his release at the Erez crossing on Monday. Israel released 224 Palestinian prisoners in a gesture to moderate Palestinian President Mahmoud Abbas. ((Hatem Moussa/Associated Press))

More than 200 Palestinian prisoners were released from Israeli jails on Monday in what Israel described as a goodwill gesture to Palestinian President Mahmoud Abbas.

The release comes as top international aid officials warned that Israel's restrictions on cash shipments to Gaza banks are unproductive and hurting Palestinian moderates.

Hundreds gathered at a military checkpoint in the West Bank before the release. From the checkpoint, the buses were to head to Abbas's headquarters in the nearby town of Ramallah for a welcome ceremony.

In all, 224 prisoners were released, Israeli Prison Service spokesman Yaron Zamir told the Associated Press, including 18 from the Gaza Strip.

Three others were also to be freed, but their release was still under review.

11,000 Palestinians in Israeli jails

An estimated 11,000 Palestinians are in custody in Israeli jails, including a number of Palestinian legislators being held for their ties to the Islamist Hamas movement. They were arrested shortly after Palestinian gunmen in Gaza captured Israeli soldier Gilad Shalit, who remains in captivity.

Some accuse the Israelis of taking them into custody as a bargaining chip for Shalit's release.

"You know the law, especially here in our area, especially mainly in Israel and the occupied territories, is a tool to make politics," Leah Tsmeal, an Israeli lawyer known for her work with Palestinians, told CBC News.

"Therefore everything can be legal, everything can be explained legally. But the purposes are not totally legal and not totally justice. They are very often political purposes."

Meanwhile, World Bank president Robert B. Zoellick, International Monetary Fund managing director Dominique Strauss-Kahn and international Mideast envoy Tony Blair have written a letter to Israel's prime minister about their concerns over restrictions on cash shipments to Gaza.

The restrictions "may have a considerable impact on the Palestinian economy and its institutions, and ultimately on Israel's longer-term relationship with the Palestinians," said the letter, addressed to Israeli Prime Minister Ehud Olmert..

Israel imposed restrictions on Gaza after Hamas seized the area in June 2007 in what it says is an effort to halt militants from launching rockets on Israeli border towns.

Palestinians say the money is used by Abbas's West Bank-based prime minister, Salam Fayyad, to pay 77,000 government employees in Gaza who remain loyal to Abbas.

Israel had allowed some trucks into Gaza with cash shipments, but after a round of rocket attacks, Israel suspended cash shipments starting in October.

A few days later, Israel sent an emergency shipment of $26 million US, only half the amount requested by Fayyad. 

Israeli government spokesman Mark Regev said he expected Israel would send more shipments.

With files from the Associated Press