TRIPOLI, Apr 30 (Reuters) Libyan leader Muammar Gaddafi held talks with Palestinian Foreign Minister Mahmoud al-Zahar, who is touring Arab states to raise funds for his cash-strapped Hamas-led government, state news agency Jana reported.

''The Palestinian minister briefed the brother leader (Gaddafi) about the developments of the Palestinian situation,'' Jana said late yesterday.

Libyan Foreign Minister Mohammed Abdel-Rahman Shalgam also attended Saturday's meeting, it added.

Jana gave no further details about Zahar's stay in Libya.

The Palestinian government has warned of economic collapse within months after Israel froze tax receipts and Western nations cut aid to the Palestinian Authority.

Zahar was the second Hamas leader to visit Libya in five weeks.

Hamas leader-in-exile Khaled Meshaal met Gaddafi later in March when the Libyan leader reiterated that Tripoli would continue support for the Palestinian people.

Washington regards Hamas as a terrorist entity. The Islamic militant group has sworn to destroy Israel and has rebuffed international demands to recognise the Jewish state and disarm.

Gaddafi, who is striving to bring back his country to the full embrace of the West after decades of isolation mostly for his support for radical groups in the Middle East and elsewhere, advocates a single state on Palestinian and Israeli land for the two peoples.

REUTERS CH PM1625