Sharif made the remarks while addressing participants of a course at the National Defence University here.
Since he assumed office last year, the premier has consistently spoken in favour of better ties with India. However, the killing of seven Indian soldiers and heavy exchanges of fire along the Line of Control sent relations plummeting.
Describing law and order and internal security as the "greatest challenge" facing Pakistan which has "internal and external" dimensions, Sharif said his objective of internal peace and economic development cannot be achieved without peace, stability and prosperity in the neighbourhood.
Stating that Afghanistan was an important neighbour, Sharif said, "I have reassured President (Hamid) Karzai that we do not wish to interfere in Afghanistan's internal affairs. A peaceful, stable and united Afghanistan is in Pakistan's vital interest".
He said Pakistan would continue to facilitate efforts for an inclusive, Afghan-led and Afghan-owned peace and reconciliation process.
"Together with the Afghan leadership, we have also embarked on efforts to further deepen and broaden our fraternal relationship. There is a positive momentum, which must be sustained and further strengthened," he said.
Sharif vowed to strengthen Pakistan's identity as a modern and democratic state which is at peace with both itself and its neighbours.
He said an imperative of Pakistan's national security policy" that the country is recognised as a responsible sovereign all over the world.
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