In a more detailed statement to the media, Krähenbühl said the U.S. contribution of $60 million, less than half of a planned $125 million installment, is "dramatically below past levels" and jeopardizes the "dignity and human security of millions of Palestine refugees, in need of emergency food assistance and other support."
In the Nuseirat refugee camp in Gaza, 42-year-old Ahmed al-Assar said his family of eight has been receiving aid from UNRWA for almost 12 years.
"I work part time in construction, but that is not enough to cover all my expenses," he said Wednesday. "Any reduction of aid would be a death sentence for refugees in Gaza. The work is almost nonexistent. There are not enough jobs. Those who work for the Palestinian Authority receive only a stipend, and Hamas employees get a quarter of their salary."
Another camp resident, Zahia Mekdad, described the aid cut as "a purely political decision" that would hurt only ordinary people.
"There has already been a reduction of aid in recent years," she said. "If it is reduced more, it is the women, children and young people who will suffer, not the politicians."
The U.S. decision to reduce funding to the U.N. aid agency makes good on President Trump's threat this month to withhold money if the Palestinian Authority refuses to take part in a peace process being prepared by the administration.
The United States pays "the Palestinians HUNDRED OF MILLIONS OF DOLLARS a year," Trump wrote on Twitter. "But with the Palestinians no longer willing to talk peace, why should we make any of these massive future payments to them?"
The United States previously provided about $360 million a year to UNRWA. The State Department made clear Tuesday that further installments will also be held "for future consideration."
The Palestinians likened Trump's threat to blackmail, seeing it as further proof that his administration is biased toward Israel. Following the president's recognition of Jerusalem as Israel's capital, the Palestinians have said the United States is not an honest broker of peace. The announcement has led to unrest in the region, with one Israeli and at least 17 Palestinians killed.
In a speech Sunday in Ramallah, Palestinian Authority President Mahmoud Abbas railed against Israel and Trump, calling the nascent U.S. peace deal the "slap of the century." Palestinians will slap back, he said.
State Department spokeswoman Heather Nauert said the aid cut is not aimed at "punishing anyone" but is more about the administration taking "a look at UNRWA, trying to make sure that the money is best spent, and best spent so that people can get the services."
She also said the administration felt that "there should be more so-called burden sharing to go around."
"The United States has been, in the past, the largest single donor to UNRWA. We would like other countries to step forward and actually help with UNRWA," Nauert said.
The agency provides educational, health and welfare services to Palestinians whose ancestors fled or were forced out of their homes when Israel was created 70 years ago. Its refugee camps and other services are in the occupied West Bank, Gaza, Jordan, Lebanon and Syria.
"We are extremely worried," said Gaza's UNRWA director, Matthias Schmale. "We support 1 million people with food. Our biggest donor to that program is the U.S . . . We will be fine for the first quarter and just hope we have enough time to persuade them to change their mind and/or to find another donor."
Israel has long said that rather than solving the Palestinian refugee problem, UNRWA perpetuates it, prolonging conflict and making peace illusory.
In a recent cabinet meeting, Israeli Prime Minister Benjamin Netanyahu said that UNRWA promoted "the narrative of the right-of-return in order to eliminate the state of Israel."
"UNRWA needs to pass from the world," he said. "The agency creates a situation in which there are great-grandchildren of refugees, who are not refugees but who are cared for by UNRWA, and another 70 years will pass and those great-grandchildren will have great-grandchildren, and therefore, this absurdity needs to stop."
Mounir Makdah, a security official at Ain al-Hilweh, the largest Palestinian refugee camp in Lebanon, said the decision marked "an attempt to push us to give up our demand to return." He added: "This will not happen. We will not give up on our right to return to our land."
Makdah said the camp leadership was holding "intensive meetings" on what steps to take in light of the decision.
"Meanwhile, we will be supporting the resistance inside occupied Palestine by all means," he said.
Israel's security establishment has long warned against disbanding the agency for fear that it could worsen already dire conditions, especially in the poverty-stricken Gaza Strip, fueling extremism, sparking violence and further weakening the Palestinian leadership.
Husam Zomlot, head of the Palestinian delegation to the United States, said that "taking away food and education from vulnerable refugees does not bring a lasting and comprehensive peace."
"The access of Palestinian refugees and children to basic humanitarian services such as food, health care and education should not be a bargaining chip, but a U.S. and international obligation," he said.
Zomlot said that by first taking Jerusalem off the table and then attempting to remove the Palestinian refugee issue by dismantling UNRWA, "Trump was heeding Netanyahu."
Hanan Ashrawi, a member of the Palestine Liberation Organization's executive committee, said the Trump administration is "targeting the most vulnerable segment of the Palestinian people and depriving the refugees of the right to education, health, shelter and a dignified life."
By doing so, she said, it "is creating conditions that will generate further instability throughout the region."
Suzan Haidamous in Beirut contributed to this report.