The US embassy to the Philippines said there were “significant concerns” about civil liberties infringements in the country and confirmed a board of experts had deferred its renewal of the Millennium Challenge Grant for a further five years.
The grant, said to be worth over $430 million, is open to nations that "demonstrate a commitment to just and democratic governance, investments in its people, and economic freedom”. It is aimed at reducing poverty in deprived areas.
"This decision reflects the board's significant concerns around rule of law and civil liberties in the Philippines," the embassy said in a statement.
"We will continue to monitor unfolding events in the Philippines, and [this] underscores that all country partners are expected to maintain eligibility, which includes not just a passing scorecard but also a demonstrated commitment to the rule of law, due process and respect for human rights.
"The Board’s deferral of a vote on the Philippines re-selection is not a suspension or termination of the Philippines’ MCC compact eligibility."
The US has been openly critical of Mr Duterte's violent "war on drugs", during which an estimated 5,900 people have been killed without trial in the space of five months.
The homes of more than 1.6 million drug suspects have been visited by police to invite them to surrender and stop using drugs, or disengage from the drug trade.
Mr Duterte responded by declaring the Philippines was to "separate" from the US in a diplomatic sense, after decades of close ties between the two countries.
The Millenium Challenge Corporation (MCC) meanwhile announced new grants had been given to Burkina Faso, Sri Lanka and Tunisia, with the Philippines still eligible for consideration in the future.
“By partnering with developing countries that meet rigorous standards for good governance, from fighting corruption to respecting the rights of women and the rule of law, we are maximising our ability to fight poverty and transform people’s lives,” MCC chief executive Dana Hyde added.
In October, Mr Duterte called US President Barack Obama "a son of a whore" and told him to "go to hell" following criticism of his policies.
The president has since courted favour from the governments of Russia and China, which have suggested they are willing to cooperate with Mr Duterte and provide aid.
Following the election of Donald Trump, Mr Duterte congratulated the President-elect on his success and hinted at a possible close partnership between the two in the future.
In October, Amnesty International said Mr Duterte’s “first 100 days as President had been marked by state-sanctioned violence on a truly shocking scale”.
The President has said he intends to extend his crackdown by “maybe another six months”. The MCC board confirmed it may revisit its decision at its next meeting, in March 2017.
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