ISLAMABAD (AFP) - - Pakistan and Saudi Arabia vowed to continue their fight against terrorism and work together on economic and defense issues, officials said.

Pakistan and Saudi Arabia said fighting extremism helps "protect Islam's identity and values," said a statement issued at the end of Saudi Crown Prince Sultan Bin Abdul Aziz's two-day visit to Pakistan.

The two countries also expressed "concern and anguish over the deteriorating security situation in Iraq and the sufferings of the Iraqi people," the statement said.

The two sides also said they hoped Iran's nuclear issue would be resolved peacefully and called for creating an independent Palestinian state in the Middle East.

The Saudi crown prince held talks with Pakistan President Pervez Musharraf and Prime Minister Shaukat Aziz and discussed bilateral as well as regional and international issues.

They agreed to further develop bilateral relations in economic, commercial, investment and defense areas, the statement said.

They also agreed on the need "to foster better understanding and harmony" among various religions through inter-faith dialogue, the statement said.

The visit was Prince Sultan's first to Islamabad as the crown prince. He earlier visited Pakistan in 1981 and 1999 when he was defense minister of the oil-rich kingdom.

Saudi Arabia is the largest oil supplier to Pakistan. It pledged 573 million dollars in aid after the massive earthquake on October 8 that killed 74,000 people and displaced more than 3.5 million others in Pakistan and Kashmir.