Islamabad has called for the complete release of frozen Afghan central bank assets, saying that utilisation of these funds should be the "sovereign decision of Afghanistan", a development that comes after US President Joe Biden seized $7 billion in assets belonging to the previous Afghan government, aiming to split the funds between victims of the 9/11 attacks and desperately-needed aid for the post-war country.

In a statement on Saturday, Pakistan's Ministry of Foreign Affairs said that the country's principled position on the frozen Afghan foreign bank reserves remains that these are owned by the Afghan nation and should be released.

"The utilization of Afghan funds should be the sovereign decision of Afghanistan," it said in a statement.

The reaction comes after Biden announced to hold half of the $7 billion foreign assets of Afghanistan for the victims of the 9/11 attacks and release the remaining amount for the humanitarian assistance of Afghanistan.

“Pakistan has seen the US decision to unfreeze the Afghan assets held by the US banks to release $3.5 billion for humanitarian assistance in Afghanistan and $3.5 billion for compensation to families of 9/11 victims,” said Foreign Office Spokesperson Asim Iftikhar.

"Over the past several months, Pakistan has been consistently emphasising the need for the international community to quickly act to address the unfolding humanitarian catastrophe in Afghanistan and to help revive the Afghan economy, as the two are inextricably linked.

"Finding ways to unfreeze the Afghan foreign reserves urgently would help address the humanitarian and economic needs of the Afghan people."

US plans to free half of $7bn frozen Afghan funds for aid, remainder to stay in US

Biden's move

Biden's step has also drawn an angry response from the Taliban, which branded the seizure a "theft" and a sign of US "moral decay", AFP reported.

Biden's unusual action saw the conflicting, highly sensitive issues of a humanitarian tragedy in Afghanistan, the Taliban fight for recognition, and the push for justice from families impacted by the September 11, 2001 attacks collide, with billions of dollars at stake.

The first stage was simple: Biden formally blocked the assets in an executive order signed Friday.

The money -- which a US official said largely stems from foreign assistance once sent to help the now defunct Western-backed Afghan government -- had been stuck in the New York Federal Reserve ever since last year's Taliban victory.

The insurgency, which fought US-led forces for 20 years and now controls the whole country, has not been recognised by Washington, mostly over its human rights record.

However, with appalling poverty gripping Afghanistan, Washington is seeking ways to assist, while side-stepping the Taliban.

The White House said Biden will seek to funnel $3.5 billion of the frozen funds into a humanitarian aid trust "for the benefit of the Afghan people and for Afghanistan's future."

The trust fund will manage the aid in a way that bypasses Taliban authorities, a senior US official told reporters, countering likely criticism in Washington that Biden's administration is inadvertently boosting its former enemy.

The theft and seizure of money held/frozen by the United States of the Afghan people represents the lowest level of human and moral decay of a country and a nation: Taliban spokesman Mohammad Naeem

Aside from the new plan, "the United States remains the single largest donor of humanitarian aid in Afghanistan," the senior official said.

More than $516 million has been donated since mid-August last year, the official said. The money is distributed among non-governmental organizations.

The Taliban fumed over Washington's move.

"The theft and seizure of money held/frozen by the United States of the Afghan people represents the lowest level of human and moral decay of a country and a nation," Taliban spokesman Mohammad Naeem had said on Twitter.

Failure and victory are common throughout history, "but the greatest and most shameful defeat is when moral defeat combines with military defeat," Naeem added.

9/11 victims seek compensation

The fate of the other $3.5 billion is also complex.

Families of people killed or injured in the 9/11 attacks on New York, the Pentagon and a fourth hijacked airliner that crashed in Pennsylvania have long struggled to find ways to extract compensation from Al-Qaeda and others responsible.

In US lawsuits, groups of victims won default judgements against Al-Qaeda and the Taliban, but were unable to collect any money. They will now have the opportunity to sue for access to the frozen Afghan assets.

Those "assets would remain in the United States and are subject to ongoing litigation by US victims of terrorism. Plaintiffs will have a full opportunity to have their claims heard in court," the White House said.

A senior official called the situation "unprecedented."

There are "$7 billion of assets in the United States that are owned by a country where there is no government that we recognize. I think we're acting responsibly to ensure that a portion of that money be used to benefit the people of the country," he said.

And the US plaintiffs related to 9/11 will "have their day in court."

Some relatives of 9/11 attack victims, however, expressed disappointment with Biden's move, saying Afghanistan should retain access to the money.

"Their country has been devastated. As a 9/11 family member I believe all available funds should go to Afghan relief," Sandra Bodley, whose 20-year-old niece Deora died on hijacked Flight 93 which crashed in a field in Pennsylvania, told AFP.

Bodley, 78, said going to war in Afghanistan and Iraq was not the correct response.

"Twenty years later I think the world can see that these two wars didn't make the world safer. They just caused more havoc, chaos and sorrow" in the region, she said.