World Bank president Paul Wolfowitz has praised Pakistan's economic progress during his first trip to South Asia.
Pakistan plans to set up trust funds for areas bordering Afghanistan
At the end of a four-day visit to Pakistan, Mr Wolfowitz announced a $500m increase in World Bank assistance for the next three years.
Meanwhile, left-wing parties in the southern Indian state of Andhra Pradesh have held protests ahead of his arrival in the state later on Wednesday.
Mr Wolfowitz took over as head of the World Bank in June.
He said that Pakistan had made good progress by achieving a growth rate of 8.4% in the past financial year.
"In my view, there is no question the glass here is half-full and is filling up," he said.
"We want to see Pakistan develop. Pakistan is an important country in an important region and Muslim world and it must realise its full potential," Mr Wolfowitz said.
The announcement of an increase in World Bank assistance will bring its total to the country to $1.5bn each year for three years.
Salman Shah, economic adviser to Pakistan's Prime Minister Shaukat Aziz said that the two sides had discussed the establishment of a trust fund for areas bordering Afghanistan.
Pakistan is the World Bank's fifth largest borrower. It is also an important ally of the US-led military action against the Taleban in neighbouring Afghanistan.
Paul Wolfowitz is travelling to India and Bangladesh after his visit to Pakistan.
In Andhra Pradesh, four left-wing groups held a demonstration in advance of his visit.
"Each loan brings new conditions against the interest of the state and its people," said protest leader DV Krishna.
Police detained 50 protesters in the state capital Hyderabad but all were later released.
Mr Wolfowitz will visit some World Bank-funded projects in rural areas of Andhra Pradesh.
The Communist Party of India (Maoist), which was banned by the state on Wednesday, said his visit was an insult to the state's 80m people.
Andhra Pradesh was one of the first Indian states to which the World Bank lent directly.