The cases dropped include charges of illegal payments relating to the purchase of thousands of Polish tractors and the construction of a polo ground inside Bhutto's residence.

 

Zulfikar Ahmad Bhutta, a prosecutor, confirmed the dropped charges, saying that Zardari's property, including businesses and a bullet-proof limousine, would be returned immediately.

 

'No revenge'

 

Zardari, the co-chairman of Bhutto's Pakistan Peoples party (PPP), spent years in jail without being convicted, insisting the charges were politically-motivated.


Farooq Naek, Zardari's lawyer, said on Wednesday that he had been acquitted.

 

"We do not believe in politics of revenge, and we believe that there should be coexistence between democratic forces," Naek, who is also a senior party leader, said.

 

A Pakistani court is expected to drop the last two outstanding cases against Zardari on March 12.

 

However, a money-laundering case against him is still pending in Switzerland.

 

Prosecutors had pushed for Zardari to be tried by a Swiss court following allegations he had deposited $55m worth of bribes in bank accounts in that country.

 

Wednesday's ruling is expected to anger ordinary Pakistanis but may smooth the way for a new government to take office and begin tackling urgent issues.

 

The PPP won last month's parliamentary elections, increasing pressure on Pervez Musharraf to resign as president.

 

Party leaders are expected to announce their candidate for prime minister on Thursday, with Makhdoom Amin Fahim, a cautious aristocrat, tipped to be the favourite.