ICC chief executive Malcolm Speed said giving the money to the Australian Red Cross and asking fans to contribute to an aid appeal on the second day of the upcoming six-day Test between Australia and a World XI in Sydney were the best way to raise funds.
Speed said the ICC board considered Akhtar's suggestion of a special One-day match between the two sides, which have already played three in the Super Series, but concluded the donation and appeal would be more effective.
"We believe that's the best way that cricket can show it's remorse, can show the people of the countries that have been affected that we're thinking of them and we're concerned to do whatever we can to ease the suffering at this terrible time," Speed told reporters.
He said he had spoken to Akhtar and the fast bowler had accepted the decision.
"He's happy and appreciative of the approach we've taken," Speed said.
Previous specially-organised matches to raise funds for victims of the December 26 tsunami disaster raised 11 million US dollars in Australia and 710,000 US dollars in New Zealand.
Pakistani captain Inzamam-ul-Haq thanked the ICC for the donation and urged cricket lovers to support aid efforts in his homeland.
"There is no food, nothing, it's a very bad condition and millions of people are affected," he said.
Australian spinner Shane Warne, who toured Sri Lanka after the tsunami, said international cricketers were eager to help following the latest disaster, which relief agencies believe may have claimed as many as 40,000 lives.
"When you see that devastation it really does touch you and I'm just happy to play my part," he said.