President George W Bush has praised visiting Pakistani President Pervez Musharraf as a "courageous leader" and a friend of the United States.
Bush said Musharraf was a friend of the US
After talks at Mr Bush's Camp David presidential retreat, Mr Bush said he would seek to work with the US Congress on a $3bn economic aid package to Pakistan.
However, he did not - as some analysts had been expecting - offer to write off nearly $2bn of Pakistan's debt to the US.
The talks at Camp David are the highlight of the general's four-nation world tour.
This is General Musharraf's biggest foreign tour since he seized power in a coup in 1999. The stated aim is to build long-term strategic relationships with the US and Europe.
President Bush said the US and Pakistan were both "determined to defeat terror".
And he said he was "encouraged by the progress" General Musharraf and the Indian Prime Minister Atal Behari Vajpayee have made in reducing tension between the two South Asian nuclear rivals.
A bullet riddled wall in Indian-administered Kashmir
But in a reference to one of the strongest areas of dispute in the region, Mr Bush said the Camp David talks had addressed "the need to address extremism and cross-border terrorism".
India insists that Pakistani-based militants continue to cross into Indian-administered Kashmir to attack Indian targets.
Only last week President Musharraf vehemently denied that claim, after talks in London with UK Prime Minister Tony Blair.
In Pakistan itself, General Musharraf is in deadlock with the opposition after he announced a raft of changes last year that the opposition have denounced as being unconstitutional.
Mr Bush spoke of the need for the "movement towards democracy in Pakistan" to fulfil General Musharraf's vision of a modern, tolerant Muslim Pakistan.
The US leader also said he had no plans to authorise the sale of F-16 fighter jets to Pakistan.
New army operation
For his part, General Musharraf said Pakistan's security efforts were making huge efforts to find Osama Bin Laden and members of his al-Qaeda organisation.
The Pakistani army in recent days began an operation in tribal areas close to the border with Afghanistan.
The army has in the past kept out of these areas which have been under the exclusive control of local tribal leaders.
President Musharraf said the operation would lead to the detention of any members there of Osama Bin Laden's al-Qaeda network.
When asked if Bin Laden was hiding there, General Musharraf replied: "Your guess, sir, is as good as mine."
After the US, President Musharraf flies to Germany to meet Chancellor Gerhard Schroeder, and then moves to France for talks with President Jacques Chirac.