The BBC's Owen Bennett-Jones in Islamabad: "Neither side has an interest in escalating the arms race"

The Pakistani Prime Minister, Nawaz Sharif, invited his Indian counterpart, Atal Behari Vajpayee, for talks to resolve the situation.

Mr Sharif said Pakistan has long favoured a meaningful dialogue and that that was still the case despite the series of nuclear tests conducted last month by both sides.

Nawaz Sharif: call for dialogue

"I say even today, Mr Vajpayee, come let us finish the arms race in this region," he said at a joint session of the Pakistani parliament, called to approve the state of emergency announced by the government immediately after Pakistan conducted its tests.

Mr Vajpayee made a statement in his own parliament earlier last week expressing his readiness to discuss the issue.

Kashmir

However, Mr Sharif also urged the world to help solve the dispute over Kashmir, which has been a stumbling block to a peace deal between India and Pakistan.

India favours bilateral talks on the issue, and has rejected any third-party mediation. However, many Pakistani officials believe that by conducting nuclear tests India has inadvertently internationalised the dispute.

Mr Sharif said that the world powers now realised that without solving the Kashmir issue South Asia could not become "a cradle of peace".

Kashmir has been the cause of two out of the three wars the two countries have fought against each other since their independence from Britain in 1947.

Austerity package

Meanwhile Mr Sharif said that details of a planned austerity package to overcome the effect of sanctions would be announced in a few days time.

Opposition parliamentarians have complained that as much as $500m was transferred out of Pakistan in the hours before the state of emergency was announced.

They have accused officials and pro-government politicians of abusing their advanced knowledge of restrictions that were about to be introduced.

Ministers said they had to impose a state of emergency so as to avoid any challenge to the austerity package in the courts.