By Mohammad Hashim
PESHAWAR, Pakistan (Reuters) - Pakistan's army pressed on with an offensive against the Taliban on Monday as the government said 700 militants had been killed and a suicide bomber killed 10 people at a security checkpost.
The offensive in the Swat valley, 130 km (80 miles) northwest of Islamabad, is seen as test of the government's resolve to get to grips with an intensifying Taliban insurgency and comes after the United States accused it of "abdicating" to the militants.
The fighting has sparked a civilian exodus from the former tourist valley, raising fears of a humanitarian crisis.
At least 360,000 people have left their homes in recent days and in all about 500,000 are expected to flee.
They join about 600,000 people displaced earlier from Swat and other areas because of fighting since August, raising fears of a long-term problem for a country already being propped up by a $7.6 billion (5.03 billion pounds) International Monetary Fund loan.
"This will not be over next week or in two weeks. We're looking at a protracted displacement crisis," Manuel Bessler, head of the U.N. Office for the Coordination of Humanitarian Affairs, told Reuters.
Prime Minister Yusuf Raza Gilani told the National Assembly the government would organise a conference of aid donors to marshal funds for the displaced.
The army launched a full-scale offensive in Swat on Thursday after a peace pact broke down and the government ordered troops to eliminate the militants.
Interior Ministry chief Rehman Malik said 700 Taliban and 20 soldiers had been killed.
Most reporters have left Swat and there was no independent confirmation of that estimate of militant casualties which was higher than figures the military has been providing.
"The operation will continue until the last Taliban is flushed out," Malik said. "The operation is continuing successfully.
"Our strategy has succeeded. We haven't given them a chance. They are on the run. They were not expecting such an offensive."
The army said 52 militants had been killed in Swat over the past 24 hours.
Pakistani stocks ended marginally lower amid worry over political tension in Karachi, the country's commercial capital, and the fighting in Swat, dealers said.
Aircraft attacked militant positions in the valley while a curfew kept frightened civilians huddled in their homes, residents said by telephone. The army lifted the curfew for nine hours on Sunday to enable people to flee.
A suicide car-bomber killed two paramilitary soldiers and eight civilians when he set off his explosives in a queue of cars at a checkpost on the outskirts of the main northwestern city of Peshawar, police said.
There was no claim of responsibility but militants have unleashed a wave of bomb attacks over the past two years, many aimed at ending military operations against them.
The offensive was launched when President Asif Ali Zardari, the widower of former Prime Minister Benazir Bhutto, was in Washington assuring a nervous United States his government was not about to collapse and was committed to fighting militancy.
Action by nuclear-armed Pakistan against militants in its northwest is vital for U.S. efforts to defeat al Qaeda and stabilise Afghanistan.
Most political parties and many members of the public support the offensive.
That could change, however, if the civilians displaced in what the government say is the country's largest-ever internal migration are seen to be suffering unduly or if many civilians are killed in the fighting.
Opposition leader and former Prime Minister Nawaz Sharif, who has sounded supportive of government action against the militants, visited a camp for the displaced and said it was everybody's responsibility to help.
"It's a very unfortunate situation," Sharif told reporters. "The nation in no way approves the activities of those elements who are responsible for the displacement and migration of these people."
The U.N. refugee agency said 360,000 people had registered with authorities after fleeing the latest surge in violence, with about 20,000 of them staying in camps.
"That figure is rising," said Ariane Rummery, a spokeswoman for the U.N. High Commissioner for Refugees. "We see people on the move and know that more are coming."
(Additional reporting by Zeeshan Haider and Robert Birsel; Editing by Alex Richardson)
