"I hereby designate the Islamic Republic of Pakistan as a major non-Nato ally of the United States for the purposes of the act and the Arms Export Control Act," Bush said in a statement released by the White House.

The decision, announced as the president made a rally-the-troops speech on Iraq here, means Pakistan is joining an exclusive club of countries that enjoy a privileged security relationship with the United States.

The announcement came despite US concerns about nuclear proliferation by the father of Pakistan's atomic program, Abdul Qadeer Khan, and followed a finding by the official probe into the September 11, 2001 attacks that Islamabad had helped Afghanistan's Taliban regime shelter Osama bin Laden.

The decision was also expected to awaken concerns in India, which does not enjoy the special status. Two Bush administration officials said they knew of no plans to similarly reward New Delhi.

Major non-Nato allies, including Argentina, Australia, Bahrain, Egypt, Israel, Japan, Jordan, Kuwait, Morocco, New Zealand, the Philippines, South Korea and Thailand, are granted significant benefits in the area of foreign aid and defence cooperation.

Major non-Nato allies are eligible for priority delivery of defence material and the purchase, for instance, of depleted uranium anti-tank rounds.

They can stockpile US military hardware, participate in defence research and development programs and benefit from a US government loan guarantee program, which backs up loans issued by private banks to finance arms exports.

However, the designation does not afford them the same mutual defence guarantees enjoyed by members of the North Atlantic Treaty Organisation (Nato).

US Secretary of State Colin Powell had announced plans to give Pakistan the special status during a March visit to Islamabad, drawing protests from India as well as Pakistan's internal Islamist opposition.

Meanwhile, Pakistan yesterday welcomed a decision by US President George W. Bush to make it a "major non-Nato ally" in recognition of bold policies adopted by President Pervez Musharraf.

"It is the success of the country's foreign policy," Information Minister Sheikh Rashid said.

The US decision would further help improve relations between the two countries and also promote Pakistan's position in global politics, he said.

The decision is in "recognition of the efforts and bold policies adopted by President General Pervez Musharraf," he said in a statement carried by state media.