While Pakistan's relations with India have improved, the dispute over Kashmir still remains unsettled, Pakistan's foreign minister said Sunday.

"Anyone thinking that the biggest issue has been resolved would be a big fool," Khursheed Kasuri said in Lahore [Images].

"Progress has been made in Pakistan-India relations and efforts are being made to solve the basic issue," Kasuri said of Kashmir.

Kasuri also said Pakistan has expressed concern about a defence deal struck between India and the United States in the last week of June, saying his country will take measures, which he didn't specify, if the agreement upsets the balance of arms in the region.

The 10-year accord between Washington and New Delhi calls for the expansion of two-way defence trade and missile defence collaboration, and it aims to step up measures against the spread of weapons of mass destruction.

On Afghanistan, Pakistan's western neighbour, Kasuri warned that the Taliban, warlords and drug barons "want to create trouble" in the country's crucial parliamentary polls scheduled for September.

A U.S.-led coalition ousted the Taliban in late 2001 for harboring al-Qaida.

"A stable Afghanistan is in the interest of Pakistan," Kasuri said.

His comments came after Afghan officials reportedly said some leaders of the ousted militia were sheltering in Pakistan, a key U.S. ally in the war against terrorism.