The UN agency that delivers basic services to millions of Palestinian refugees appealed on Tuesday for $1.6 billion in funding after its head warned it was struggling to fulfill its mandate due to spiraling costs and shrinking resources.

Established in 1949 following the first Arab-Israeli war, UNRWA provides public services including schools, primary healthcare and humanitarian aid in Gaza, the West Bank, Jordan, Syria and Lebanon.

"Compounding challenges over the last year including underfunding, competing global crises, inflation, disruption in the supply chain, geopolitical dynamics and skyrocketing levels of poverty and unemployment among Palestine refugees have put immense strain on UNRWA," the agency said in a statement.

UNRWA Commissioner-General Philippe Lazzarini told Reuters in November that the agency's financial woes could result in it no longer being able to fulfill its mandate, which last month was renewed by the UN for another three years.