Taliban spokesman Muslim Khan said the official, Kushal Khan, and his guards had been released in exchange for two militants who were arrested in Peshawar last week.

Though a peace pact is in force between Taliban backed hardline religious groups and the provincial government banning hostilities still the Taliban insisted on Swap for their release.

Kushal Khan, who was recently appointed as District Coordination Officer, and his six guards were abducted on Sunday on the outskirts of Mingora, the main city in Swat.

"The government has released our two men and they will soon release another," he told reporters in Swat.

"The government violated the agreement by arresting our men in Peshawar and killing one in Dir. Therefore, we had to do this," Khan said, referring to the official's abduction.

However, the Swat peace pact covers only the Malakand division in the NWFP, official reports had said. It is not clear how an arrest of a Taliban cadre in provincial capital of Peshawar was construed by the group as a violation of the deal. Earlier, the Taliban had denied reports about the official's abduction, saying he was their "guest" and had been picked up for "discussing important matters".

Despite a ceasefire called by the Taliban and local authorities, militants wearing masks are patrolling roads in Swat and manning check posts.

The kidnapping of the official comes just days after the North West Frontier Province government reached an agreement with religious hardliners to enforce Islamic laws in Swat in a bid to counter the Taliban insurgency.

Following the agreement, leaders of the banned Tehrik-e-Nifaz-e-Shariah Mohammadi began peace parleys with the Taliban.

The Taliban called a 10-day ceasefire on February 15 to facilitate the talks. The government has announced a separate truce.

However, a journalist was killed by unidentified gunmen shortly after the Taliban ceasefire was announced last week, raising questions about the future of the peace process.

Swat has been a hotbed of militancy over the past two years, with fierce fighting between the Taliban and security forces claiming the lives of hundreds of people, a majority of them civilians.