Pakistan's cabinet is expected Wednesday to agree to the president attending talks on Afghanistan in Chicago and approve the lifting of a blockade on overland NATO supplies to its war-torn neighbour.

Prime Minister Yousuf Raza Gilani is to chair the meeting at 0600 GMT, just hours after the cabinet's defence committee -- which groups security chiefs and top ministers -- cleared the way for President Asif Ali Zardari to attend next week's NATO summit.

That meeting also authorised officials to conclude negotiations on new terms and conditions for resuming the transit of fuel and other non-lethal items required by NATO troops in their decade-long fight against the Taliban in Afghanistan, the prime minister's office said.

Islamabad shut its Afghan border crossings to NATO after US air strikes killed 24 Pakistani soldiers on November 26 as relations with the United States, already frayed by the discovery of Osama bin Laden in Pakistan, plunged into their worst ever crisis.

Pakistan's attendance in Chicago, where NATO leaders meet Sunday and Monday, would ease its international isolation and could boost its leverage over the future of Afghanistan, as Western countries pull out their combat forces by 2014.

Islamabad boycotted the last major talks on Afghanistan, held in Bonn in December.

Sources familiar with discussions between Pakistani and US officials finalising an agreement on logistics and fees for the NATO transit lines have told AFP the blockade will probably be lifted by the beginning of next week.

But the move will essentially see Pakistan climb down on demands for an American apology for the November air strikes and an end to drone strikes.

The prime minister's office said overnight that Pakistan would "continue to remain engaged" with the United States on both issues.

Analysts say Pakistan had no choice but acquiesce to immense international pressure to reopen the border with US cash needed to help boost its meagre state coffers with the government seeking re-election within a year.

Washington said both countries had made "considerable progress" on ending the blockade, which has halted fuel and supply trucks from the southern port city of Karachi to two Afghan border crossings.

"We will continue to work on this throughout the week. Obviously, it'll be a wonderful signal if we can get it done by the time of the summit," State Department spokeswoman Victoria Nuland said.

Mir Mohammad Yousuf Shahwani, chairman of the All Pakistan Oil Tanker Owners Association, told AFP on Tuesday he had been informed by a senior official in the petroleum ministry that Pakistan would reopen the supply line within days.

The United States has made increasing use of more expensive routes into northern Afghanistan and the Pakistan supply routes constitute as little as 25 percent of what NATO needs to sustain itself in its nearly 11-year fight against the Taliban.

Pakistan previously negotiated a fee of $160 per 40-foot container and is now looking to secure anywhere from $320 to $500, although the figure has yet to be agreed, said one source familiar with the discussions.

The United States has also guaranteed payment of at least $1.1 billion should the borders reopen, as compensation for fighting militants, one source told AFP.

NATO spokeswoman Oana Lungescu said Pakistan had "an important role" to play in the future of Afghanistan and that the alliance was working "very closely" with Pakistan on reopening the lines.