The United States Congress has blocked nearly $200m in aid for the Palestinians, threatening projects such as food aid, health care, and support for efforts to build a functioning state.

The decision to delay the payments runs counter to the wishes of the Obama administration and reflects Congressional anger at Palestinian President Mahmoud Abbas's so far unrealised pursuit of Fatah-Hamas reconciliation and statehood recognition at the UN.

The freezing of the funds, which were to have been dispersed in the US fiscal year that ends today, is the most tangible sign yet of the seriousness of Congressional leaders' threats of an even wider halt to funding in the coming year if Mr Abbas continues with his actions at the UN. It was strongly condemned yesterday by the Palestinian Authority.

There have been persistent demands in Congress to withhold up to $600m – the average amount given by the US in bilateral assistance to the West Bank and Gaza every year since 2008 – in the next financial year over the issue.

The administration remains, as does Congress, opposed to the Palestinians' application for full UN membership, which Mr Abbas submitted last week. But it argues that assistance to the Palestinian people is what a US official described as "an essential part of the US commitment to a secure future and two-state solution for Palestinians".