The US government has cut $100m (£75m) in aid to Ethiopia over the ongoing dispute about the construction of a mega dam on the River Nile, news agency Reuters reports, quoting a US congressional source.

"Up to $100m or so will be affected, of which $26m is funding that expires at the end of the [financial year]," the source told Reuters.

The move is likely to be seen as US President Donald Trump punishing Ethiopia after the country rejected US-led mediation with Egypt and Sudan, the other parties in the dispute.

But an official at the US state department told Financial Times that the decision was temporary:
“The decision to temporarily pause certain assistance for Ethiopia reflects our concern about Ethiopia’s unilateral decision to begin to fill the dam before an agreement and all necessary dam safety measures were in place,” the official said.

Ethiopia claimed that the US was biased and backed Egypt in the talks.

The aid cut comes just over a month after Ethiopia announced that it had started withholding water in the Grand Ethiopian Renaissance Dam (Gerd).
Prime Minister Abiy Ahmed's government has maintained that Ethiopia had every right to construct the dam to meet its power needs.

However, Egypt - which relies on the Nile for more than 90% of its fresh water supplies - fears the dam will exacerbate existing shortages.

Ethiopia's ambassador to the US told Financial Times that he hoped the US would change its mind over the aid cut.

“We’ve asked them to reconsider and we’re waiting. We hope 117 years of diplomatic relations will not be damaged because of an issue not related to the two countries,” Fitsum Arega said.