Exiled former Pakistani Prime Minister Nawaz Sharif said he will challenge President Gen. Pervez Musharraf in elections this fall, even as the general was considering a political alliance with another rival.

Government spokesman Mohammed Ali Durrani dismissed statements by former Prime Minister Benazir Bhutto that Musharraf has already agreed to give up his army post as part of a power-sharing deal. Instead, Durrani said Musharraf was still considering the plan.

"No decision has been made," Durrani said. "When he will decide, he will announce it."

Bhutto, a representative of Pakistan's main opposition party, said Wednesday that Musharraf had agreed to step down as head of the army, possibly before the presidential elections.

She and Musharraf were negotiating a power-sharing agreement that could end military rule eight years after Musharraf seized power in a coup, Bhutto said. Officials close to Musharraf have confirmed that the two are engaged in such talks.

Meanwhile, Sharif said Thursday he will return to Pakistan on Sept. 10 to challenge Musharraf in the elections.

A court ruled earlier this month that Sharif, who was overthrown by Musharraf in 1999, can return from exile in London.

That prospect has added to the urgency of an agreement between Musharraf and Bhutto, who share a relatively sectarian, pro-Western philosophy and stress the need to prevent the political crisis from destabilizing the nuclear-armed nation.

Durrani, the government's information minister, stopped short of denying that Musharraf was prepared to step down as army chief as part of a possible agreement.

"So far as dialogue is concerned, there can be discussion on everything," he said, but he added that the issue of Musharraf's military uniform "will be decided by the president himself. If anyone else says something about this, it is just their own opinion."

Asked if Musharraf will run in the upcoming election as military chief, Durrani replied, "He has a very clear stand on this that he will decide it himself and in the light of the constitution and law."

Musharraf's office said earlier he would not succumb to "pressure or ultimatum" in deciding whether to quit the army.

At stake is a pact that would protect Musharraf's troubled re-election bid from looming legal challenges and public disenchantment with military rule. In return, Musharraf is expected to give up his role as army chief and let Bhutto return from exile in London to contest year-end parliamentary elections.

Ministers in Pakistan have said the two sides were close to finalizing an agreement.

Musharraf has insisted that the constitution allows him to be army chief until the end of 2007 but has never made clear when - or if - he will step down.

However, Bhutto and other opposition leaders argue the constitution obliges him to give up that post before he asks lawmakers for a fresh presidential mandate in September or October.

Bhutto said that while Musharraf had also agreed to drop corruption charges against her and dozens of other parliamentarians, a remaining stumbling block is the balance of power between Parliament and the president, who can currently dismiss the prime minister and dissolve the legislature.

Conservative Religious Affairs Minister Ijaz-ul Haq accused Bhutto of blackmailing Musharraf and of working "against Islam, against Pakistan." He said on Geo news television that any deal could collapse amid "ideological differences" and reservations about waiving corruption charges against her.

The minister is the son of Gen. Zia-ul Haq, who ousted Bhutto's father as prime minister and saw him executed on murder charges in 1979 during Pakistan's previous spell of military rule.

Musharraf has seen his authority erode since March, when he tried unsuccessfully to remove the Supreme Court's top judge. The move triggered protests that grew into a broad pro-democracy campaign.

The court reinstated the judge in July, raising expectations that it will uphold legal challenges to Musharraf's re-election plan.

Officials said the pact with Bhutto would include constitutional amendments to forestall those challenges.

Musharraf had vowed to prevent both Bhutto and Sharif from re-entering Pakistan. He blames them for the corruption and economic problems that nearly bankrupted the country in the 1990s, when Bhutto and Sharif each had two short-lived turns as prime minister.

But with the United States pressing for more democracy as well as a redoubled effort against al-Qaida and Taliban militants near the Afghan border, Musharraf recently began calling for political reconciliation and an alliance of moderates to defeat extremists.

In Washington, State Department spokesman Tom Casey declined Thursday to comment on whether Washington wanted Musharraf to give up his army post.

But he said the U.S. wanted Pakistan's intense political debate to result in free and fair elections and a government that continues to be "a force to help work with us to fight against extremism."

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