Foreign Minister Hina Rabbani Khar. — Photo by AFP

ISLAMABAD: Pakistan's most troubled foreign relationships have improved in recent months, its top diplomat said on Saturday, pointing to upcoming trade talks with New Delhi and broad agreement on regional security goals with Washington as evidence.

Foreign Minister Hina Rabbani Khar, in an exclusive interview with Reuters, said negotiations to normalise trade with India would allow progress on other issues between the two South Asian rivals.

“I think it's broadly agreed that we need to make some simultaneous progress on these issues,” she said.

Trade has long been tied to political issues between the neighbours, who have fought three wars since independence from Britain in 1947.

The hope is that an increase in trade will feed into wider trust between the two countries and help them resolve major flashpoints, like the disputed Kashmir region, although a solution to this problem has proved intractable for decades.

“But there has been a great improvement in the environment,” she said. “I think we can move forward.”

She strongly denied that Pakistan was not committed to finalising Most Favoured Nation (MFN) status for India, as alleged by an unnamed Indian government official on Friday, who said Islamabad was “backtracking” on the issue in the face of domestic opposition.

“There is absolutely no question of backtracking of cabinet approval of trade normalisation with India,” she said. “I want to completely dismiss any indication that there's any retraction on what we said.”

Pakistan announced it would upgrade India to a most favoured nation on Wednesday, a move that would help normalise commercial ties by ending heavy restrictions on what India is allowed to export across the border.

Wednesday's announcement was trumpeted on both sides as a milestone in improving relations shattered by attacks by allegedly Pakistan-based militants in Mumbai in 2008. Formal peace talks, known as the “composite dialogue”, resumed in February. Khar said the two countries' commerce secretaries would meet in mid-November to hammer out the details of the trade agreement, but that there was no lack of commitment to the agreement itself.

“The cabinet very clearly gave them a way forward, which is trade normalisation with India,” she said.

Prime Minister Yousuf Raza Gilani also rejected the charges of backtracking in comments to reporters in Lahore on Saturday.

Less than one per cent of India's merchandise exports are sold to Pakistan, in terms of dollar value, but in September a joint statement pledged to double bilateral trade flows within three years to about $6 billion.

Lasting peace between the two countries is seen as key to stability in the South Asian region and to helping a troubled transition in Afghanistan as Nato-led forces plan their military withdrawal from that country in 2014.

Khar said relations with the United States were also on the mend, with “a complete convergence of stated interests” on Afghanistan.

“Nothing would make us happier than a strong government in Afghanistan,” she said.

“I look at the last few weeks, and relations with the US have been generally positive. It's basically the operational details to agree on.”

The United States and its allies in Afghanistan have been pressing Pakistan for years to tackle the Haqqani network, a powerful insurgent group which says it owes allegiance to the Afghan Taliban, but has traditionally been seen as close to Pakistan's Inter-Services Intelligence (ISI).

Pakistan denies supporting the Haqqani network and attributes its lack of action against the group to the fact that its army is already overstretched fighting Pakistani Taliban militants and others.

At an Istanbul conference in early November focusing on stabilising Afghanistan, a senior US official said that Pakistani action against the Haqqani network did not necessarily need to be military.

Instead it would include “ensuring that intelligence doesn't go to the Haqqani network” and “that they don't benefit from financial resources or flow of finances.”