The US government has awarded more than $150m (£98m) in contracts to companies and individuals in Afghanistan that are known to support the Taliban, according to a US spending watchdog.

Multimillion dollar contracts have been given over the past five years to 43 companies working in construction, logistics, road building and IT that have links to the insurgents.

The head of the US-based Special Inspector General for Afghanistan Reconstruction (Sigar), John F Sopko, said: "Dating back to 2008, Sigar has identified more than $150m in reconstruction contracts and sub-contracts that have been awarded to companies known to be providing material support to insurgent and terrorist organisations in Afghanistan."

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Despite warnings about this last year from both Sigar and General James Mattis, the former commander of US Central Command, the army has failed to act.

In a new report to the US Congress last week, Mr Sopko said: "I am deeply troubled that the US military can pursue, attack, and even kill terrorists and their supporters, but that some in the US government believe we cannot prevent these same people from receiving a government contract."

In a response, the Pentagon spokesman, Matthew Bourke, said: "The Army Procurement Fraud Branch did receive and review the 43 recommendations late last year, but the report did not include enough supporting evidence to initiate suspension and debarment under Federal Acquisition Regulations."

It is not yet known how many of the 43 individuals and businesses may have been given contracts by Britain. The Foreign and Commonwealth Office did not respond to a request for comment.

Although US law prohibits terrorist organisations or their supporters from being awarded government contracts, this applies to the Department of Defense, but not to the Department of State or the US Agency for International Development. It also relates to contracts worth $100,000 (£65,000) or more – despite most contracts being worth less than this.

Last week, a group of Republican and Democrat politicians proposed new legislation to give Sigar greater powers, enabling the watchdog to suspend or debar Afghan and foreign contractors.

Jason Chaffetz, a Republican Congressman, said: "It's sickening to think that we've been giving money to the very people who are killing our brave servicemen and women."

As the summer "fighting season" gets under way a resurgent Taliban is attacking across the country. It is in stark contrast to the repeated assurances by the US and UK that progress is being made and we are "on track" to meet the 2014 deadline for withdrawing combat troops.

Civilians are suffering as fighting intensifies, with a 23 per cent rise in the number of men women and children killed or wounded in the first half of this year compared to 2012. Since January more than 3,800 civilians have been killed or wounded, according to a report from the United Nations Assistance Mission in Afghanistan (Unama) released last week.