Pakistani President Pervez Musharraf has yet to decide whether to step down as army chief, a spokesman said yesterday, as former prime minister Nawaz Sharif announced he would return home from exile on September 10.

Mr Sharif told a London news conference he would fly back to Islamabad and travel by road to Lahore, his power base and Pakistan's political nerve centre, before mounting a challenge to Mr Musharraf at elections.

"This man Musharraf is on his way out... We will be launching a movement against Mr Musharraf and his government," said Mr Sharif who faces the possibility of arrest on his return.

With his term coming to an end and his popularity plummeting, US ally Musharraf is trying to shore up his position before his attempt to secure another presidential term.

He has turned to self-exiled former prime minister Benazir Bhutto for help and his aides have been discussing a power-sharing deal with the two-time prime minister in London.

Ms Bhutto has insisted an agreement would hinge on Mr Musharraf stepping down as chief of the army, which has ruled for more than half Pakistan's history since independence in 1947.

She said on Wednesday she had almost sealed a deal that would see Mr Musharraf quit as army chief, possibly before he seeks re-election next month. But the President's spokesman, Rashid Qureshi, said no final agreement had been reached.

Mr Musharraf aims to get re-elected president for another five years between mid-September and mid-October before his term as army chief expires at the end of the year. A parliamentary election is due around the turn of the year.

Western governments are closely following the turbulence in Pakistan, a nuclear-armed state whose support is critical to fighting al Qaeda and defeating the Taliban in Afghanistan.

Mr Musharraf has ruled out declaring an emergency or imposing martial law but fears of drastic action linger among Pakistanis.

The Supreme Court last week added to pressure on Mr Musharraf to agree terms with Ms Bhutto by ruling that Mr Sharif, the prime minister Mr Musharraf overthrew in 1999, could return home.

After the 1999 coup, Mr Sharif was convicted of graft and given a life sentence on a hijacking charge related to his refusal to allow landing rights to an airliner carrying Mr Musharraf back from Sri Lanka, despite it being short of fuel.