If the current stagnation in the peace process between Israel and the Palestinians persists, the prospect of a two-state solution will give way to a single, apartheid state, the Palestinian Authority warned in a report to donors on Saturday.

“Without a tangible shift from a conflict management approach towards a just and lasting political agreement… Israelis and Palestinians will inevitably slide into one state governed by the principles of apartheid,” AFP quoted the report as saying.

The document was reportedly prepared in advance of a New York gathering of the Ad Hoc Liaison Committee, which coordinates international development assistance for the PA.

“The status-quo is not sustainable,” the 22-page report said.

The PA document echoes a recent statement made by the the Ad Hoc Liaison Committee to the effect that recent Palestinian state-building efforts would prove futile if they weren’t accompanied by an accord with Israel.

“While the PA has continued building the institutions of a future Palestinian state, the prolonged absence of a credible political horizon for a final-status agreement, ongoing conflict and the occupation represent ever more acute challenges to this progress,” the UN-affiliated group said on Thursday.

The document, prepared by UN Special Coordinator Robert Serry, focused particular attention on Area C, East Jerusalem and the Gaza Strip, the three areas where the PA is least able to extend its authority. It argued that the West Bank’s Area C — under full Israeli military and administrative control under the Oslo Accords — is fundamental to the contiguity of the West Bank and the viability of a future Palestinian state.

Area C comprises about 60% of the West Bank: It is home to approximately 70,000 Palestinians, and the area in which the majority of the Jewish settlements are set up.

According to Serry, the PA’s usual sponsors will need to increase their contributions to ensure its fiscal viability.

A report by the World Bank last week predicted a $1.5 billion deficit for the PA this year.

“Donors do need to act urgently in the face of a serious fiscal crisis facing the PA in the short term,” Mariam Sherman, the World Bank’s country director for the West Bank and Gaza Strip, said in a statement, according to Reuters.

Philip Podolsky contributed to this report.