``Impoverished Pakistan cannot afford full-scale war and is counting on receiving a 100-million-dollar loan next month from the International Monetary Fund. Washington could hold up those funds to pressure Pakistan,'' the Washington Post quoted a senior Clinton administration official as saying.

However, Washington's steps will depend on the assessment of Pakistan's response to President Bill Clinton's message by commander-in-chief of US Central Command (CENTCOM) General Anthony Zinni, the official told the Post. Clinton decided to mobilise the G-8 against Pakistan and sent the Zinni mission to Islamabad last week to get it to withdraw its troops and so-called `Mujahiddeen' from the Kargil areaafter receiving a letter from Prime Minister Atal Behari Vajpayee saying casualties among Indian troops could force India to cross the LoC to settle the matter, the Post said.At this point, the US is uncertain whether Pakistan will comply with Clinton's demand, the official told the newspaper.

``We are not making any predictions,'' the official said, ``It (the situation) could get worse if the Indians reach the level of frustration that they need to strike elsewhere.''

Concern about possible escalation in the fighting arose after Vajpayee's letter, officials said, because it told Clinton that the ``spectacle of Indian troops coming down from the mountains in body bags was raising public pressure on the government''. ``It stoked already high US fears that India, which has lost more than 100 troops trying to dislodge Pakistan, would storm across the cease-fire line (LoC) that divides Kashmir or open a second front elsewhere on its border with Pakistan, widening the first armed conflict between the rivalssince both tested nuclear weapons last year,'' the Post said.

``Clinton feared the possibility that some 700 Pakistani troops, camped on firebases 16,000 feet up in the Himalayas, could destroy the rapprochement India and Pakistan began last winter, ignite a regional war and scuttle the administration's dwindling hopes of a constructive relationship with all of South Asia,'' it said.

Clinton and Secretary of State Madeleine Albright had already sent multiple messages urging restraint on India and Pakistan, and the former decided to turn the heat on Pakistan after his national security advisor Samuel `Sandy' Berger and Assistant Secretary of State for South Asian Affairs Karl F Inderfurth received Vajpayee's message, the Post added.

The paper quoted Inderfurth as saying, ``This (the fighting) has been enormously disappointing. We didn't think the next step on the diplomacy bus would be Kargil,''