INTERVIEW-Pakistan spy agency must be reformed -US official

By Arshad Mohammed

WASHINGTON, Sept 15 (Reuters) - The Pakistani military's powerful and controversial spy agency needs reform but there is no indication this is happening yet, the top U.S. diplomat for South Asia said on Monday.

"It has to be done," Assistant Secretary of State for South and Central Asian Affairs Richard Boucher said of revamping the Inter-Services Intelligence agency, widely known as the ISI.

Asked if he had seen signs of reform, he told Reuters: "No, I don't have anything in particular I would point to right now."

Despite its help in fighting al Qaeda, the ISI is viewed with deep suspicion by U.S. officials who believe it retains links to the Taliban and other militants blamed for supporting attacks on U.S. forces across the border in Afghanistan.

In July, Afghan President Hamid Karzai said Pakistani agents were behind some of the violence in his country, including a suicide attack on the Indian embassy in Kabul.

India also has blamed Pakistani intelligence agents, a charge Pakistan denied.

The spy agency is also suspected of having a hand in helping destabilize past civilian governments in Pakistan.

Pakistan's new government led by Prime Minister Yousaf Raza Gilani tried to rein in the ISI in July by placing it under Interior Ministry control, only to reverse course within days in an embarrassing flip-flop.