But Benazir still faces a raft of charges of corruption and misrule after her government was sacked in 1996.

Judge Parkash Lal Ambawani of the special accountability court in the southern city of Karachi also acquitted four other accused in the case of appointments in PIA.

"The prosecution has failed to prove its case against any of the accused," Judge Ambawani said while announcing the verdict.

Benazir, who has been living in exile since early 1999, was granted exemption from being present in the court.

Though now living in Dubai, she still leads the Pakistan Peoples' Party, opposed to President Pervez Musharraf.

Benazir and her husband Asif Zardari are facing several charges in Pakistan and abroad, including one in Geneva relating to accusations dating back to the 1990s that the two accepted commissions for awarding contracts to two Swiss companies to do business in Pakistan.

Zardari was released from prison in Pakistan in December after eight years in detention and now lives with his wife and children.

Benazir, who governed Pakistan twice -- between 1988 and 1990, and again from 1993 to 1996 -- has vowed to return to Pakistan and contest the 2007 general elections.

President Pervez Musharraf, who seized power in a military coup in 1999, has vowed to block any move by Benazir and another exiled former prime minister Nawaz Sharif to return to power.

On Tuesday, Benazir received the World Tolerance Award for 2005 from former Soviet leader Mikhail Gorbachev for being the first female premier of the Islamic world.