Palestinian Prime Minister Salam Fayyad resigned on Saturday, exposing a rift in the Palestinian leadership in the West Bank at a time when the United States is pushing to revive dormant peace talks with Israel.

Palestinian Authority President Mahmoud Abbas accepted Fayyad’s resignation and asked him to stay in his post until a new government is formed, according to the official news agency WAFA. The two leaders had been at odds over economic policy and the extent of the prime minister’s authority.

A former World Bank official who was strongly backed by Washington, Fayyad was credited with building institutions of future Palestinian statehood while cleaning up financial corruption and revamping the Palestinian security forces.

His efforts had received Western financial assistance, but the Palestinian Authority has been in fiscal crisis for months because of a shortfall of foreign aid, leading to strikes and unrest among government employees.

Fayyad’s economic policies have been criticized by top officials of Abbas’s ruling Fatah party, straining relations between the two leaders. The dispute worsened after last month’s resignation of Finance Minister Nabil Qassis. Fayyad accepted the resignation but was overruled by Abbas, challenging the prime minister’s authority to hire and fire cabinet ministers.

A political independent without a popular power base, Fayyad, 61, had targeted entrenched interests in the Palestinian elite, fueling resentment against him in Fatah. The Islamist Hamas movement, which rules the Gaza Strip, has called Fayyad a tool of American and Israeli interests, objecting to his leadership of a proposed unity government under a reconciliation accord with Fatah.

Secretary of State John F. Kerry held talks with Fayyad this past week, signaling support for the embattled prime minister, and Israeli media reports said Washington had pressed Abbas to retain him.

Fayyad’s departure could hamper American efforts announced by Kerry to boost the Palestinian economy. An expert in development who also has served with the International Monetary Fund, Fayyad was expected to play a key role in that effort, as well as in moves to revive peace negotiations.

Fayyad has served since 2007 as prime minister of the Palestinian Authority, promoting what he has billed as a ground-up effort to build the institutions of a Palestinian state. The World Bank and IMF have both said that in key areas the Palestinian administration is ready for statehood, though it faces continuing economic restrictions that block sustainable growth.

While he has drawn praise from Western nations, Fayyad’s critics have accused him of failing to develop the West Bank economy, making the Palestinian Authority dependent on foreign financial support and vulnerable to diplomatic pressure from donor nations.

In Gaza, Hamas spokesman Fawzi Barhoum said Fayyad and his government had “worked to protect the Zionist occupation and U.S. interests.”