The UN agency for Palestinian Arab refugees said on Tuesday that it cannot afford to repair Gaza homes damaged in last year’s war with Israel – because donors have failed to live up to their pledges to pay.

“The agency has exhausted all funding to support repairs and rental subsidies,” said the United Nations Relief and Works Agency (UNRWA), according to the AFP news agency.

“$5.4 billion was pledged at the Cairo (aid) conference last October and virtually none of it has reached Gaza. This is distressing and unacceptable. It is unclear why this funding has not been forthcoming,” added the UN agency.

UNRWA said the homes of more than 96,000 Gazans were destroyed or damaged during the conflict, the same estimate it made last month and which is double its original estimate. The high level of destruction is due to the fact that Hamas heavily entrenched its terrorist network in the civilian infrastructure of Gaza.

The Islamist militant movement Hamas, which controls Gaza, denounced the UNRWA decision, saying it would “aggravate the plight of thousands of families” and urging it to put pressure on donors to honor their pledges.

UNRWA respond, “Some funds remain available to begin the reconstruction of totally destroyed homes.”

The agency said cutting subsidies to displaced residents now renting alternative accommodation could force large numbers back to UN schools and center which are already sheltering 12,000 people.

“UNRWA in Gaza has so far provided over $77 million to 66,000 Palestine refugee families to repair their home or find a temporary alternative,” it said, according to AFP.

“This is a tremendous achievement; it is also wholly insufficient… We are talking about thousands of families who continue to suffer through this cold winter with inadequate shelter.

“People are literally sleeping amongst the rubble. Children have died of hypothermia,” UNRWA added.

Two babies died in Gaza this month as dozens of homes were flooded in brutal storms that brought freezing rain and gale-force winds.

Gaza’s sole power station, which was damaged during the war, is struggling with a severe lack of fuel and is only able to supply the enclave with six hours of power per day.

A Hamas official warned recently that the coastal territory could become a breeding ground for extremism unless promised reconstruction is accelerated.

“Our message to the world, which is scared of terrorism and extremism, is that the delay in rebuilding Gaza and the continuing blockade against it will make it a ripe environment for the spread of extremism and terrorism,” Khalil al-Haya told a Gaza City meeting of MPs of the movement two weeks ago.

A spokesman for UNRWA in Gaza on Tuesday said the ceasefire that halted the fighting with Israel would be in jeopardy if rebuilding work were to stall.

“Halting reconstruction will have dangerous consequences,” Adnan Abu Hasna told AFP.

“By delaying payment of money for reconstruction the donors are putting the ceasefire in danger,” he warned.