WASHINGTON, Feb 26: The United States on Thursday lifted a travel ban on Libya and decided to allow some US firms to negotiate deals in the country as it welcomed Tripoli's progress on getting rid of lethal weapons.

The Bush administration took the further step of allowing Libya to set up a diplomatic presence in Washington. The moves came a day after Libya retracted statements by Prime Minister Shokri Ghanem, who had denied his country's guilt in the 1988 Lockerbie airliner bombing.

After Libyan leader Colonel Muammar Qadhafi in December pledged to disclose and dismantle all of his country's nuclear, chemical and biological programmes, the United States has held out the prospect of fully normalized ties at some point.

The comments from Mr Ghanem had caused the announcement on the lifting of travel restrictions to be delayed by two days, but the extent of the steps taken by the Bush administration showed the United States wants to respond in kind to the pace of Libyan efforts.

"Over the course of the last two months, Libya has taken significant steps in implementing its commitment to disclose and dismantle all weapons of mass destructions programmes," the White House said in a statement.

Lifting the travel ban will allow US oil companies to travel to Tripoli to negotiate deals for the day that trade sanctions are lifted. Libya is eager to bring US companies back, especially in the oil industry, its main source of foreign earnings. -Reuters