Saarc, which groups Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka, also noted the urgent need to develop energy and food security.

The leaders approved the immediate establishment of a food bank to cope with regional shortages triggered by rising prices, as well as plans for improving energy security in the region, home to nearly one-fifth of the world's population.

The foreign ministers of the Saarc members signed the anti-terrorism agreement, and endorsed the creation of a regional development fund and rules for standardisation of products traded among member countries.

The leaders agreed to focus on developing hydropower and renewable energy programmes involving solar equipment and wind turbines.

Saarc was established in 1985 to promote economic co-operation, but progress in most areas has been slow.

'Terrorism combat'

The security pact calls for freezing funds that might be used for terrorist activities, regular meetings between security chiefs, the exchange of intelligence, and training of personnel dealing with terrorism and drug offences.

The deal may be difficult to implement in view of accusations by India and Afghanistan that elements of the ISI helped an armed group bomb India's embassy in Afghanistan on July 7, killing 41 people.

During a meeting with Manmohan Singh, the Indian prime minister, on Saturday, Yousuf Raza Gilani, Pakistan prime minister, offered to launch an independent investigation into the allegation, Shivshankar Menon, India's most senior diplomat, said.

Pakistan had earlier denied the accusation.

Afghan-Pakistan pledge

Separately, the leaders of Afghanistan and Pakistan agreed to "re-engage" in the fight against extremism, a joint statement said.

Hamid Karzai, the Afghan president, and Gilani met on the sidelines of the summit on Sunday,  according to a joint statement.

"The two sides agreed to co-ordinate their efforts to stop cross-border terrorism," the statement said.

"At the suggestion of Pakistan, the Afghan side agreed to re-engage on all bilateral and multilateral forums.