The International Monetary Fund on Friday praised the Palestinian government for what it calls 'bold reforms' and said it was making strides toward fiscal sustainability.

The agency's report Friday praises President Mahmoud Abbas' government for freezing public sector hiring and wage increases and reducing utility subsidies. But it says the deficit remains high.

The Abbas government has promised international donors to try to reduce spending, and especially the government payroll.

The IMF issues regular progress reports on the government's performance. The reports are part of a Palestinian development plan underwritten by $7.7 billion (4.9 billion) in international aid.

The IMF report also calls on Israel to ease movement restrictions to help the Palestinian economy recover.