Israeli troops killed a Palestinian (searchmilitant in an arrest raid Wednesday, and a Palestinian demonstrator wounded by soldiers last week in a clash over Israel's West Bank (searchseparation barrier died in a hospital.

He was the third man to die from army shots fired at the fence confrontation.

In Wednesday's raid, soldiers shot dead a member of the Al Aqsa Martyrs' Brigades (search), a violent group linked to Yasser Arafat's Fatah movement, in the Tulkarem refugee camp shortly after sunrise, residents said. The army said the man, armed with an assault rifle, was approaching troops, who opened fire and killed him.

In Ramallah, doctors at the main hospital reported the death of a man shot and wounded in last Thursday's protests at Bidou, northwest of Jerusalem.

Amid growing fears of anarchy and the financial collapse of his administration, Arafat on Tuesday accepted a key administrative reform, removing an obstacle in the way of vital foreign aid, his prime minister, Ahmed Qureia, said.

After months of delay, Arafat agreed that members of security forces would be paid directly, replacing the system of handing bundles of cash to commanders for distribution -- an invitation to corruption. Foreign donors were balking at additional aid unless the reform was implemented.

Qureia was due to meet a key regional U.N. official Wednesday, but aides to the Palestinian premier said they did not expect substantive discussion on the funding issue.

Israel and the United States have been pressing the Palestinians to consolidate more than a dozen overlapping and competing security forces and wrest control from Arafat, but to no avail.

The 2004 Palestinian budget, approved in January, projected a 50 percent deficit of $800 million, underlining the critical role of foreign aid. The Palestinian economy has been decimated by more than three years of Mideast violence.

Palestinians blame Israel for punitive travel restrictions, but Israelis cite the need for security measures after thousands of attacks, including more than 100 homicide bombings.

Also Tuesday, statistics released by the Israeli government showed that construction in Jewish settlements in 2003 increased by 35 percent compared to the previous year, despite Israel's acceptance of a U.S.-backed peace plan that forbids such building.

The "road map" peace plan states that Israel must freeze "all settlement activity (including natural growth of settlements)." Israel insists that first, Palestinians must stop all violence, another "road map" requirement.

About 230,000 Jewish settlers live among around 3.5 million Palestinians in the West Bank and Gaza Strip, which Israeli captured in the 1967 Middle East War.

Palestinians charge that the settlements are encroachment on their land and demand that all be removed. The United States considers the settlements as obstacles to peace, and most other international bodies call them illegal.