SM Krishna & Hina Rabbina Khar

Citing the upcoming trade talks with New Delhi and broad agreement on regional security goals with Washington as evidence, Pakistan's Foreign Minister said today that its troubled relationship with India has improved in recent months.

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 nuclear-armed 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 neighbors, 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 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.

Khar also said that 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 U.S. have been generally positive. It's basically the operational details to agree on, she said.

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 spy agency. 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 U.S. 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.