The freezing of all security assistance to Pakistan comes after President Donald Trump in a New Year's Day tweet accused the country of giving nothing to the US but "lies and deceit" and providing "safe haven" to terrorists in return for USD 33 billion aid over the last 15 years.
The suspended amount also include USD 255 million in Foreign Military Funding (FMF) for the fiscal year 2016 as mandated by the Congress.
"Today we can confirm that we are suspending national security assistance only, to Pakistan at this time until the Pakistani government takes decisive action against groups, including the Afghan Taliban and the Haqqani Network," State Department Spokesperson Heather Nauert told reporters.
"We consider them (terror groups) to be destabilising the region and also targeting US personnel. The US will suspend that kind of security assistance to Pakistan," she said.
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Though there was no immediate reaction from Islamabad to the US move, Defence Minister Khurram Dastagir said yesterday that, "we need to have a holistic review of the entire situation. We are conducting a complete analysis and coolly formulating our response."
There should not be any doubts when it comes to the defence of Pakistan, he had said.
Historically, the US has provided Pakistan over USD 1 billion in security assistance annually.
In August, while unveiling his new South Asia strategy, Trump had accused Pakistan of giving "safe haven to agents of chaos, violence, and terror," and said the time had come "for Pakistan to demonstrate its commitment to civilisation, order, and to peace".
At the same time, Nauert made it clear that the US action has nothing to do with Pakistan not taking action against the Mumbai terror attack mastermind and JuD chief Hafiz Saeed.
"We have certainly expressed our concern about the mastermind of the 2008 Mumbai attacks being let out of house arrest in Pakistan. To my knowledge, that has nothing to do with that," she said in response to a question on Saeed, who was released by Pakistan on November last year.
Meanwhile, Department of Defence Spokesperson Lt Col Mike Andrews told PTI that National Defense Authorisation Act 2017 provides up to USD 900 million for Pakistan in the CSF.
Of these funds, USD 400 million can only be released if the Secretary of Defence Jim Mattis certifies that the Pakistan government has taken specific actions against the Haqqani Network.
"At this stage all Fiscal Year 17 CSF have been suspended, so that's the entire amount of USD 900 million," Andrews said.
According to a senior State Department official, no decision has been taken on the fate of USD 255 million security assistance to Pakistan for the fiscal year 2017.
The deadline for that is September 30 this year.
Mattis along with the Secretary of State Rex Tillerson have travelled to Pakistan in recent months to deliver tough message to the country's leadership. So, this action should not come as a surprise to them, Nauert said.
Now, the money that has been suspended at this time does not mean that it will be suspended forever, she said.
"Pakistan has the ability to get this money back, in the future, but they have to take decisive action. They have to take decisive steps," she added.
"People have long asked, why don't you do more about Pakistan, and I think this sort of answers that question," she said.
In an interaction with reporters, two senior state department officials insisted that such a move is not a punishment, but to provide an "incentive" to Pakistan to take more action against terrorist groups.
"We have not done anything that's irreversible here. All this funding is available to Pakistan, if they undertake to take the measures that we've asked of them," one official said.
"Pakistanis have repeatedly said we don't care about this money. What matters I think to the Pakistanis is that it is the symbolism of doing this that it represents a deterioration of our relationship that they care about a great deal," the official said.
The US and others have long complained that Pakistan offered safe haven to the Afghan Taliban and their allies, the Haqqani Network, allowing them to carry out cross-border attacks in Afghanistan. Pakistan denies allegations but President Trump has escalated the criticism against the country since he took office last January.
Yesterday, US Secretary of State Rex Tillerson had placed Pakistan on a special watch list for severe violations of religious freedom.