Anti-US sentiment runs high in Pakistan

The move will allow the US to resume aid payments to Pakistan.

The measures were imposed after the bloodless coup in 1999 which brought General Pervez Musharraf to power.

President George W Bush said in a written statement that waiving the sanctions would ease the transition to democratic rule in Pakistan and was "important to US efforts to respond to, deter, or prevent acts of international terrorism."

Sources in Congress said it cleared the way for Pakistan, a current member of the UN Security Council, to get about $250m of economic aid already approved by Congress this year.

Pakistan - one of six undecided Security Council members - has been under pressure to back the US over a resolution which could unleash war against Iraq.

But US officials have denied that the latest move by Washington is connected to the Iraq crisis.

One State Department official insisted it was a technical matter - a waiver of sanctions because of the new financial year.

Washington has been hoping for Pakistan's support over Iraq

The White House also announced on Friday that Mr Bush would meet Pakistan's Prime Minister, Mir Zafarullah Khan Jamali, at the White House on 28 March.

High on the agenda is the war on terror, along with regional and international issues.

US rewards

In the wake of the 11 September 2001 attacks on the US, Pakistan has emerged as a key ally in efforts to fight terrorism.

It severed its links to the former Taleban rulers of Afghanistan who had given refuge to al-Qaeda leader Osama Bin Laden and allowed his network to run training camps for militants on Afghan soil.

In response, the US lifted various sanctions involving weapons sales, government credits and financial aid which had been imposed because of nuclear tests conducted by Pakistan in 1998.

The most recent result of the co-operation between the two countries - which is not popular in Pakistan - is the recent arrest of Khalid Sheikh Mohammed, one of the FBI's most wanted suspects over the 11 September attacks.

General Musharraf, who extended his terms as president in a referendum last April, formally handed power to a civilian government last November but critics say parliament has little power to challenge his rule.