Pakistan has been suspended since Musharraf's 1999 coup
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Pakistan is to remain suspended from the Commonwealth, delegates at the organisation's summit in Nigeria have been told.
New Zealand's premier Helen Clark said there would be no change until Pakistan embraced Commonwealth demands for democratic and judicial reform.
Pakistan was suspended in 1999 after a coup led by General Pervez Musharraf.
Earlier, secretary-general Don McKinnon had raised Pakistan hopes by saying it was "moving in the right direction".
Some Western members had been keen to readmit Pakistan because of its co-operation in the
US war on terrorism.
Judicial obstacle
But Ms Clark said the Commonwealth would not readmit Islamabad until General Musharraf had stepped down as head of the armed forces and made further moves on democratic and judicial reform.
Indian Foreign Minister Yashwant Sinha, added that judicial reforms, the key obstacle raised in a September review, had not been addressed.
Pakistan's interests will dictate the agenda, says Masood Khan
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"Since there has been no progress on the resolution of the Legal Framework Order, matters remain where they were in September and therefore the decision remains what it was in September, namely the continued suspension of Pakistan," he said.
The Legal Framework Order is a set of controversial constitutional changes pushed through by President Musharraf that Pakistan's main opposition parties refuse to accept.
Canadian Prime Minister Jean Chretien said Pakistan's democracy was far from perfect, although the nation "was making a good contribution to the war on terrorism".
Earlier, Pakistan's foreign ministry spokesman Masood Khan said he had taken heart from the secretary-general's statements about Pakistan's elections last year.
Mr Khan told the BBC's Newshour: "We've been reassured by the Commonwealth secretary-general who has pointed out that our parliament is more representative of all segments of society."
Mr Khan admitted Pakistan had suffered from being excluded from inter-governmental Commonwealth meetings.
However, he warned that future democratisation would not be dictated by external forces.
"In our own interests and according to our own conditions, we are trying to bring in democracy, fully representative democracy, and we are not doing so to please anybody - the Commonwealth or other organisations. This is in the interests of Pakistan," Mr Khan said.