The cabinet meeting on Wednesday, with Prime Minister Shaukat Aziz presiding, ruled out imposition of emergency and cleared the way for contacts with political parties for "free and fair elections", first to the presidency and later to the National Assembly and provincial legislatures, the media reported on Thursday.

The cabinet approval was on expected lines, political observers noted, despite reservations of the ruling Pakistan Muslim League's (Qaid) leadership about the prospects of having to share power in future with the Pakistan People's Party.

The Abu Dhabi meeting between Musharraf and Benazir Bhutto has already triggered defections from PML(Q) and other parties to PPP. Information Minister Mohammed Ali Durrani dubbed them 'routine'.

The presidential election is likely to be held between Sept 15 and Oct 15, media reports said.

There has been speculation about Aziz being replaced and a deputy prime minister, a nominee of Benazir, being inducted in the run-up to the polls. The cabinet denied that any such move was in the offing.

Meanwhile, former Pakistani prime minister Benazir Bhutto said she will return from exile this year to take part in a general election due next year, according to an interview published yesterday.

"Yes, the Pakistan People's Party (PPP) and I will be part of an election in Pakistan this year," Benazir told the English-language Emirates Today newspaper.

Benazir, who has lived in self-imposed exile in London and Dubai since 1998 because of corruption allegations against her, could be detained on the charges if she goes back to Pakistan.

She held secret talks in Abu Dhabi on Friday with Pakistan's embattled military ruler Pervez Musharraf about a pre-election power-sharing deal, but they reached no agreement on two key issues, Pakistani officials said.

The sticking points were Musharraf's dual role as president and head of Pakistan's powerful army and a rule that prevents Benazir having a third term as premier.

General elections are due by early 2008.

Benazir said talks between her political party and the government aimed to restore stability to Pakistan, but it was too soon to be certain of their outcome.

"The contacts between the PPP and the Musharraf regime are aimed at restoring democracy and the rule of law," Benazir told the UAE newspaper.

"It is too early to say whether a deal may be brokered to re-establish democracy in Pakistan but both sides are discussing the issue."

The talks come as Musharraf faces trouble on all sides, from a wave of Islamist attacks sparked by the army's storming of a radical Islamabad mosque to a bruising legal defeat by the country's chief justice.