Pakistan anti-graft board refuses to arrest PM

ISLAMABAD (Reuters) - The chief of the Pakistani government's anti-corruption department rejected on Thursday a Supreme Court order to arrest the prime minister, television channels reported, providing some relief to a government gripped by political turmoil.

On Tuesday, the court ordered the arrest of Prime Minister Raja Pervez Ashraf in connection with alleged kickbacks in transactions involving rental power plants when he served as power minister.

Fasih Bokhari, head of the National Accountability Bureau, told the Supreme Court that investigations of the allegations against Ashraf were incomplete, television channels reported.

The court asked Bokhari to produce case records so that it could decide whether there is enough evidence to prosecute the prime minister and other officials accused in the case.

But fresh troubles may be brewing for the government, which has been heavily criticised for its failure to strengthen the economy, fight militancy and eradicate poverty.

The Supreme Court has admitted a petition filed against Sherry Rehman, Islamabad's ambassador to the United States and a well-known member of the ruling Pakistan People's Party, accusing her of committing blasphemy.

Court documents show that the police have been directed to investigate the allegations. Rehman has faced death threats from militants for calling for reforms of Pakistan's anti-blasphemy law, which has been condemned by human rights groups.

The administration is already facing pressure from fiery cleric Muhammad Tahirul Qadri, who has fired up thousands of protesters camped outside parliament with his calls for the resignation of political leaders and electoral reforms.

Qadri, who backed a military coup in 1999, is calling for the immediate resignation of the government and the installation of a caretaker administration in the run-up to elections due in the next few months.

Speaking to supporters in the heart of the capital in heavy rain on Thursday, Qadri issued what he called a final warning to the government.

"Now I give an ultimatum that the president and his team must come for dialogue in one and a half hours and it's the last peaceful offer to them," said Qadri who returned home from Canada just a few weeks ago and became a media sensation with his calls for a new political landscape in Pakistan.

"Today is the last day of our sit-in. Tomorrow, we will act with a new strategy."

He did not elaborate.

Qadri's appearance at the forefront of Pakistan's political scene has fuelled speculation that the army, which has a long history of involvement in politics, has tacitly endorsed his campaign in an effort to pile more pressure on a government it sees as inept and corrupt.

Qadri and the military deny this.

Nevertheless, his appeal has cast fresh uncertainty over the government's effort to become Pakistan's first civilian administration to complete a full term.

The military has ruled Pakistan for more than half of its 65 years since independence. Current army chief General Ashfaq Kayani has vowed to keep the military out of politics.

(Additional reporting by Katharine Houreld; Writing by Michael Georgy; Editing by Raju Gopalakrishnan and Robert Birsel)