The Senate stayed in session later than planned to strike the deal [AFP]

The US Senate has reached a deal to avert a government shutdown and make billions of dollars of aid available to victims of recent natural disasters.

The deal, made on Monday, would end a standoff that has threatened disaster aid delivery to thousands of citizens and put the government at risk of having to shut down operations for the third time this year.

The tough battle over the deal is unlikely to quell concerns that the current Congress is unable to pass even basic legislation without a fight, ahead of tougher decisions to come over the budget in the next few months.

Republican and Democratic legislators have been deadlocked over whether more budget cuts would be required to allow for the additional disaster aid needed to help those who have been displaced by one of the most extreme years for weather in US history.

FEMA funding issues

Earlier on Monday, the Federal Emergency Management Agency (FEMA) said that its disaster fund was running low, but would likely only run out by the end of the week (several days longer than had earlier been expected).

The extension allowed lawmakers to drop the fight over how to pay for the additional aid, as FEMA will now not require additional funds until the beginning of the next financial year on October 1.

The Democrat-controlled Senate was expected to approve a measure to keep the government running until November 18, when lawmakers will have to finalise their spending bills for the new fiscal year beginning on Saturday.

The measure includes a sum of $2.65 billion for FEMA's disaster fund, to be made available on Saturday. The existing FEMA funds could run out before then, but the disruption would only last a few days.

The Republican-controlled House of Representatives would have to approve the bill, but lawmakers in the lower house are on a weeklong break, so the Senate deal includes a separate, short-term bill to fund the government until the House returns.

The House could approve the short-term deal this week, before the financial year ends on September 30.

Battles over the budget have taken the US government to the brink of a shutdown in April, and to the edge of a sovereign default in August. The latter prompted international credit rating agency Standard & Poor's to downgrade the US from its sterling AAA credit rating for the first time in history.