Leaders of the eight-nation South Asian Association for Regional Cooperation attending a summit in Colombo meet at the national parliament yesterday. (Back: L-R) Nepal Prime Minister Girija Prasad Koirala, Sri Lanka's parliamentary Speaker WJM Lokubandara, Sri Lankan President Mahinda Rajapakse, Pakistani Prime Minister Yousuf Raza Gilani, Afghan President Hamid Karzai, Bangladeshi Chief Adviser Fakhruddin Ahmed, Indian Prime Minister Manmohan Singh. (Front from behind: L-R) Maldives President Maumoon Abdul Gayoom and Bhutan Prime Minister Lyonchen Jigmi Y Thinley. The summit was overshadowed by tensions between nuclear-armed India and Pakistan. Photo: AFP

The leaders of Afghanistan and Pakistan agreed yesterday to "re-engage" in the fight against Islamic extremism, a joint statement said, after ties had soured following an attack on the Indian embassy in Kabul.

Afghan President Hamid Karzai and Pakistan Premier Yousuf Raza Gilani met in Colombo on the sidelines of a South Asian summit, according to a joint statement released here.

"The two sides agreed to coordinate their efforts to stop cross-border terrorism," the statement said.

"At the suggestion of Pakistan, the Afghan side agreed to re-engage on all bilateral and multilateral forums," it added.

Karzai directly accused Pakistan's intelligence agency of involvement in the July 7 suicide attack on India's embassy in Kabul. The blast killed more than 60 people, including two Indian diplomats.

A week later Kabul announced it would boycott a series of meetings with Islamabad in protest.

Islamabad has denied its Inter-Services Intelligence was involved in the attack, a charge also made by New Delhi and, reportedly, US government officials.

Karzai and Gilani had also agreed after their "cordial" breakfast meeting that their foreign ministers would meet over ways to build "close and constructive engagement" between the neighbours, the statement said.

The aim was to "build confidence and develop a common strategy at the political, military and intelligence levels in collaboration with their coalition partners and Nato/Isaf," it said.

Nato's International Security Assistance Force (Isaf) has around 52,000 troops in Afghanistan, helping the government to fight attacks by insurgents that officials say are heavily supported by extremist elements in Pakistan.

The Afghan government says the fight against the rebels should be tackled at its roots in Pakistan instead of Afghanistan becoming a battlefield.

On Saturday Afghan President Hamid Karzai said here terrorism is spreading "like wild fire" in South Asia, particularly in Pakistan, and receiving institutional support.

"In Pakistan, terrorism and its sanctuaries are gaining a deeper grip as demonstrated by the tragic assassination of Benazir Bhutto," Karzai said at the opening of a regional summit, referring to the dead opposition leader.

Terrorism is the most "menacing" challenge faced by South Asia, home to 1.5 billion people in eight countries, he said.

"We need collective action to wipe out terrorism in the region," added Karzai, whose government is battling a Taliban rebel-led insurgency and whose relations with neighbouring Pakistan have been going steadily downhill in the past few months.

His comments came as Pakistan Prime Minister Yousuf Raza Gilani sat in the audience for the inaugural session of the two-day summit of the South Asian Association for Regional Cooperation (Saarc).

Afghanistan has repeatedly accused Pakistan of clandestinely supporting Taliban rebels.

Karzai last month blamed Pakistan's intelligence service for a deadly suicide attack on the Indian embassy in Kabul that killed 60 people -- a charge Islamabad has denied.

Gilani also referred to terrorism as the main challenge facing the region, a sentiment echoed by other Saarc leaders at the session, and condemned the attack against the Indian embassy.

The Pakistan premier was due to hold separate talks with his Indian counterpart Manmohan Singh later Saturday to discuss the strained peace process between the two countries.

Tensions between rivals India and Pakistan are seen overshadowing the summit aimed at fostering greater regional economic cooperation in the poor region.

India has also blamed "elements" in Pakistan -- by which it refers to the state spy agency, the Inter-Services Intelligence (ISI) -- for the attack on its Kabul embassy.