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The UK has suspended aid to Rwanda, amid concerns about the country's role in the conflict in Democratic Republic of Congo.
Ministers said the UK would not now release a payment worth £21m.
An aid payment of £16m was paid to Rwanda in September despite question marks over its alleged support for the M23 militia in DR Congo.
The government also said it would give a further £18m for immediate humanitarian needs in the DR Congo.
International Development Secretary Justine Greening said the money, which was due to be handed over next month, would not be released because President Paul Kagame's regime had breached agreements.
'Credible and compelling'
It follows a controversial decision by Ms Greening's predecessor, Andrew Mitchell, to authorise payment of £16m to the country on his last day in the job in September.
Mr Mitchell, who had previously frozen aid to the country, cited progress at international talks as the reason for making the payment.
President Kagame's regime has been praised for improving the economic and social conditions in the east African country, in which it is estimated more than 800,000 people were killed in ethnic violence during 1994.
But Mr Kagame, in power since 2000, has come under fierce criticism recently for allegedly funding the M23 rebel group in the east of the Democratic Republic of Congo (DRC).
A leaked United Nations document says Rwanda's defence minister is effectively commanding the rebellion.
The violence has drawn international condemnation and the US and some European countries have withheld aid from the Kagame regime.
Ms Greening said: "The government has already set out its concerns over credible and compelling reports of Rwandan involvement with M23 in DRC.
"This evidence constitutes a breach of the partnership principles set out in the memorandum of Understanding, and as a result I have decided not to release the next payment of budget support to Rwanda.
"We are committed to finding lasting solutions to the conflict in this region and will work with the governments of Rwanda and DRC to secure a peaceful resolution to the situation in eastern DRC."