Egyptian-American talks about a proposed $1 billion in economic relief have been frozen as a result of Egypt's half-hearted response to the attacks on US embassy in Cairo last week, the Washington Post reported Monday.

Relations between Cairo and Washington hit a rough patch following widespread anti-American sentiments in Egypt and other Muslim countries over a film that denigrates Islam and the Prophet Mohamed produced in California.

News that the two nations were close to finalising a debt relief programme surfaced earlier in September. Senior US officials had told news agencies that the Obama administration aimed at going to Congress "soon" with a plan for using $1 billion in debt relief to help Egypt stabilise its economy and expand its private sector.

After the latest events, however, the fate of any new US help to Egypt has been thrown into question.

"Folks are going to wait and see how things materialise both with the protests and on Capitol Hill," a congressional aide was quoted as saying by the Post.

The American daily, however, added that several US officials had affirmed that the "delays are expected to be temporary and that there is no major re-evaluation of US aid to Egypt."

The strain between Egypt and Washington culminated when President Obama referred to Egypt as neither an ally nor enemy of the United States. While US officials later diluted the president's comments, the incident remains an uncommon rift between the long-time partners.

Meanwhile, another senior congressional staffer cited by the Post suggested that the "long-term fate of US assistance to Egypt" should be decided within the next couple of weeks.

Others US officials, however, explained the delay as a normal reaction to the violent incidents in Cairo as well as "a test of Egyptian President Mohamed Morsi’s resolve."

It took Egypt's newly elected president more than 48 hours to condemn the breach of the US embassy premises in Cairo and the removal of the American flag.

Egypt is the second largest recipient of US aid after Israel, receiving an average of $1.6 billion in aid annually since 1979. Of this sum, more than 65 per cent – or $1.3 billion – goes towards military aid, which plays an important role in the shaping of Egypt's foreign policy.