THE US EMBASSY in Pakistan says it terminated funding for a $20 million project to develop a local version of Sesame Street amid reports of corruption.

The organisation in question is the Rafi Peer Theater Workshop, a local group that jointly developed the show with Sesame Workshop, the creator of the American series.

Embassy spokesman Robert Raines said today the US terminated funding but declined to provide details.

The Pakistan Today newspaper reported the cause was financial irregularities at Rafi Peer, citing unnamed sources close to the project. Rafi Peer denied the allegations, saying the US ended its participation after providing $10 million because of lack of available funds.

The US had provided funding for the programme to help improve education in the country, where one-third of primary school age children are not in school.

The programme was also intended to increase tolerance at a time when Pakistan is wracked by a Taliban insurgency and the influence of radical views is growing.

The programme had gone on air last December with a cast of local characters. The American version of Sesame Street first aired in 1969 and the US government has worked with the company behind it since then to produce shows in 20 other countries.

(Characters from the Pakistani Sesame Street on display in Lahore last October. Photo: AP Photo/KM Cahudary)

- Additional reporting by Christine Bohan

Previously: Sesame Street rules out prospect of Bert and Ernie wedding >