LONDON (AFP) - Former Pakistani prime minister Benazir Bhutto said Thursday she was expecting an amnesty from corruption charges, removing a major obstacle to a power-sharing deal with President Pervez Musharraf.

"We are optimistic today but I cannot say everything is finalised," she told reporters after a two-day meeting of the Pakistan People's Party (PPP) leadership in London to discuss a deal with Musharraf before weekend elections.

"We're expecting an ordinance today," she added, referring to a decree from Musharraf which would include an amnesty for corruption charges which drove her into self-imposed exile.

The self-exiled Bhutto made no other comments as she arrived for a meeting of her opposition Pakistan People's Party (PPP) in London but her spokesman, Wajid Hasan, confirmed that she was referring to an amnesty.

"It's definitely an amnesty," he told AFP, adding that Musharraf's office was expected to send a draft of the reconciliation ordinance by email. "They will send it to us today."

The comments were a turnaround from Wednesday when she warned that PPP lawmakers could resign from parliament en masse in a bid to discredit Musharraf's expected re-election in polls on Saturday.

Musharraf, who seized control of the nuclear-armed Islamic republic in a 1999 coup and is now a key US ally, is set to win as his allies dominate the national and provincial assemblies that will conduct the vote.

He has said he will step down as army chief if he is re-elected -- a key Bhutto demand -- but has conceded that mass resignations might affect his credibility.

The dropping of corruption charges against Bhutto, a two-time prime minister, were central to her demands in the talks over for a power-sharing deal which Musharraf is hoping to clinch to shore up his dwindling support.

The general's rule has been rocked in recent months by protests over his sacking of a supreme court judge and a bloody crackdown on extremists at a mosque in Islamabad.

An alliance with Bhutto, one of Pakistan's most popular politicians despite having spent eight years in exile, would be a major boost to his political fortunes.

In addition to the curruption charges, sticking points in the power-sharing talks include Bhutto's demands that Musharraf give up his power to sack the prime minister and remove a limit on prime ministers serving more than two terms.

"Hectic negotiations" between the PPP leadership and the Musharraf government since Wednesday led to progress on these points, Bhutto said. "We're expecting an understanding on these issues," she added.

"We think agreements can be made but so far things are not final," she added at the chaotic press conference at the residence of her chief negotiator in central London.

Aides said however that little if any progress was made toward scrapping a constitutional provision allowing the president the power to dissolve the parliament.

"The balance of power between the presidency and the parliament has not been resolved," Bhutto said, adding the problem would be taken up in a later phase of negotiations.

Bhutto has served twice as head of government from 1988-1990 and again from 1993-1996 but under the current constitution she would be barred from serving a third term.

An aide who asked not to be named said "this issue has not been resolved" and would be included in a later phase of negotiations.

Bhutto struck a more conciliatory tone than on Wednesday, even though key points had not been settled.

"There cannot be democracy if there is a confrontation between the largest political party (PPP) and the presidency," she said.