The decision was taken after a probe found that at least three prisoners repatriated from the UK were released by local corrupt officials even before they completed their sentences - which was mandatory under the treaty, prompting British authorities to launch a formal complaint with Islamabad.
The three prisoners convicted for drug smuggling and murder were repatriated to Pakistan in 2010 to complete jail terms ranging from 18 to 25 years but were set free within two months.
Khan said a probe following the compliant showed that two prisoners were set free in two months and the third after one day.
"We arrested two officials including an interior ministry official and a police officer," he said.
He said those involved in the illegal release of prisoners had brought bad name to the country, and added, "We will show to the world that Pakistan is a responsible country and we will not spare anybody involved in corruption."
The agreement with Britain was inked in 2010 but the UK suspended it in 2012 after the fraudulent release of the convicts.
Last year, the British government had agreed to restore the agreement after assurances and measures promised by the government to fix the problem.
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