Mahmoud Abbas has urged the international community to increase support for the Palestinians or risk a "total catastrophe" in the occupied territories.
The Palestinian president used a donor conference in Paris to appeal for $5.6bn (£2.8bn) in aid by 2010 to help work towards setting up a viable Palestinian state.
"Without this support, without the payment of aid that will allow the Palestinian treasury to fulfill its role, we will be facing a total catastrophe in the West Bank and Gaza," Mr Abbas told delegates.
The conference, hosted by French president Nicolas Sarkozy, was attended by officials from more than 70 countries and follows on from the Annapolis conference in the US last month.
Mr Sarkozy pledged $300m (£149m) on behalf of France. The biggest pledges came from the EU ($659m) and the US ($555m).
Tony Blair attended the conference in his role as the envoy for the Quartet of Middle East peace negotiators.
The former prime minister said it was not just a donors' conference but also a "state-building conference".
"What we pledge today will be indispensable to the creation of the [Palestinian] state," Mr Blair told delegates.
Mr Abbas started the one-day conference by calling on Israel to curb its activities in the occupied territories.
"I expect a complete halt of all settlement activities without exception," Mr Abbas said, calling for the dismantlement of so-called "wildcat settlements", the lifting of military barrages, a halt to construction of the security barrier and prisoner releases.
Israel has said it supports the Palestinian reconstruction drive, but is under pressure to lift restrictions on freedom of movement in the occupied West Bank and Gaza Strip to allow the plan to take shape.
Ehud Olmert, the Israeli prime minister, endorsed the international effort to bolster the Palestinian economy, but said he would not agree to steps that compromise Israel's security.
"We'll do everything to help the development and strengthening of the Palestinian Authority infrastructure, but not at the price of giving up any vital security interests," Mr Olmert told members of his Kadima party in Israel.
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