KARACHI, March 16: The US and Pakistan will hold talks on Thursday on a US aid package for the South Asian country totalling at least $600 million, Pakistani officials said on Tuesday.

Finance Minister Shaukat Aziz and Alan Larson, US Undersecretary of State for Economic Affairs, will meet to discuss the package, a senior finance ministry official told Dow Jones Newswires.

"We will discuss the $600 million package for the next (US) fiscal year beginning October 2004," he said. However, Pakistan hopes to convince the US to increase the amount to $700 million, another official said.

The funds would be the first disbursement of a five-year $3 billion aid programme for Pakistan announced by President George Bush when Pakistani President Pervez Musharraf visited Washington last year.

Half of the money would be spent on defence and the rest would be economic assistance, the finance ministry official said. The US already has disbursed $395m in aid to Pakistan under a different programme for the current fiscal year.

Mr Larson is part of a US delegation headed by US Secretary of State Colin Powell, who is visiting South Asia this week to discuss regional issues, including the recent warming in relations between India and Pakistan, steps to combat nuclear proliferation and the war against terrorism.

Islamabad already is drawing quarterly payments from the US for the use of Pakistani logistical facilities by the US military for its war on terrorism in Afghanistan.

Pakistan also plans to use the talks to ask the US for an increase in financial assistance from the US Export-Import Bank and the Overseas Private Investment Corp, the official said. The OPIC extended a $300 million line of credit to Pakistan after the country joined the US-led coalition against terrorism.

Pakistan's role in the reconstruction of Afghanistan and Iraq will be discussed as well, he said. A US business delegation is also due to visit Pakistan this week, led by US Assistant Trade Representative William Ashley. - Dow Jones Newswires