(Adds details, background)

By Barry Moody

KAMPALA, Nov 22 (Reuters) - The 53-nation Commonwealth suspended Pakistan's membership on Thursday, after President Pervez Musharraf failed to meet a deadline to lift emergency rule and resign as army chief.

The Commonwealth had given Musharraf until Thursday to lift the state of emergency he imposed on Nov. 3.

Musharraf has begun rolling back some elements of emergency rule and Pakistani officials say he will be sworn in as a civilian leader within days. This week he freed thousands of detainees held since Nov. 3. He has also promised a parliamentary election on Jan. 8.

But the Commonwealth Ministerial Action Group (CMAG), charged with reviewing Pakistan's membership, said: "The situation in Pakistan continues to represent a serious violation of the Commonwealth's fundamental political values."

CMAG had therefore "suspended Pakistan forthwith from the Commonwealth pending the restoration of democracy and the rule of law in that country," the organisation's Secretary-General Don McKinnon, told a news conference, reading from a statement.

The statement expressed disappointment that while there had been some progress, many of the Commonwealth's demands, laid down on at a meeting on Nov. 12, had "remained substantially unfulfilled".

While suspension has few immediate practical consequences, analysts say it could further isolate Pakistan and discourage foreign investment. The nine-member CMAG was established in 1995 to deal with violations of Commonwealth rules on democracy.

DIFFICULT DECISION

The meeting ran five hours over schedule, apparently indicating difficulty in reaching a decision.

Commonwealth sources said Asian CMAG members Sri Lanka and Malaysia were reluctant to act now against Pakistan while Tanzania and Canada had pushed hard for it to be suspended.

But British Foreign Secretary David Miliband said: "Every country was fully in favour of the decision, but it was a decision taken in sorrow not in anger ... the chance is for Pakistan now to make the changes that are in their interest."

British Prime Minister Gordon Brown, who arrived in Kampala shortly before the CMAG decision, told reporters: "Commonwealth ministers have made a clear and necessary decision with the suspension of Pakistan from the Commonwealth."

The other members of CMAG are Papua New Guinea, Malta, Lesotho, Malaysia and St Lucia but the latter was absent.

A British source held out the possibility that Pakistan could be readmitted to the Commonwealth if satisfactory elections were held in January.

It was the second time Pakistan had been suspended after being barred in 1999 when Musharraf seized power in a bloodless coup. Islamabad was re-admitted in 2004 in recognition that democratic progress had been made.

The Commonwealth, grouping 1.8 billion people, or more than a quarter of the world's population, will begin a three-day summit in Kampala on Friday.

While critical of Musharraf's actions, the United States favours giving him some leeway, as an ally in the fight against al Qaeda and the Taliban, to put things right before the poll. But the Pakistani opposition says it may boycott the election.

Reed Brody, spokesman for Human Rights Watch, applauded the Commonwealth decision, saying: "The ministers ... have told General Musharraf that martial law and subversion of constitutional rule have no place in the Commonwealth. (Additional reporting by Tim Cocks, Jeremy Clarke and Adrian Croft; editing by Elizabeth Piper)

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