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Ashraf Ghani, president of Afghanistan

President Ashraf Ghani and his rival, former chief executive Abdullah Abdullah, were in discussions over forming a government to hold talks with the Taliban, but those discussions broke down and they told the US they could not make a deal.

“The United States is disappointed in them and what their conduct means for Afghanistan and our shared interest,” said US secretary of state Mike Pompeo.

“Their failure has harmed US-Afghan relations and, sadly, dishonors those Afghan, Americans, and coalition partners who have sacrificed their lives and treasure in the struggle to build a new future for this country.”

Pompeo warned Afghan leaders that he is prepared to cut another $1bn of aid next year, while also announcing a review into the cooperation between the two countries, in order to “identify additional reductions” in spending.

“The United States remains convinced that a political settlement is the only solution to the conflict,” he said of Afghanistan’s fight with the Taliban.

Decades of insecurity have hampered the Middle Eastern country’s economy, which according to the IMF receives aid worth nearly 40% of its GDP, which the government uses to fund about three quarters of its public services, infrastructure and security needs.

In a December report, the IMF lists the biggest risks to the struggling economy, including “a deterioration in security, heightened political tensions [and] a significant drop in aid”.

Pompeo said he would reconsider the cuts if Afghan leaders form an inclusive government to take part in the peace process.