With drug labs and supply routes under growing pressure, the insurgents have less than half the cash they had a year ago, said Major General Richard Mills, who leads coalition troops in Helmand province, the key poppy-growing region for the Taliban.

"We have intelligence that indicates to us he has a financial crisis on his hands, he has a cash flow problem," Mills said of the Taliban.

Since a mostly American force pushed back the Taliban in the Marjah area of Helmand in February and targeted the militants' opium "treasury," the insurgents had less money to resupply fighters, buy explosives and attract new recruits, he told reporters by video link from Camp Leatherneck in Helmand province.

"We believe that the local insurgency here within the province has less than one half of what they had last year in operating funds," said Mills, citing "sensitive intelligence" reports.

A blight on the poppy harvest this year, along with efforts by local Afghan authorities to offer farmers alternative crops, had also helped undermine the Taliban's opium profits, the general said.

He said coalition and local forces were making steady progress in Marjah and across Helmand province, and that the Afghan army and police soon could be ready to take over security duties in some districts.

"I do believe in the coming months ahead there will be areas in which we can turn over a significant portion of the security to them for their execution," Mills said.

He cited the provincial capital Lashkar Gah, and Nawa and Garmshir as towns where Afghan forces could gradually take on more responsibility from foreign troops.

The allied strategy in the war hinges on building up Afghan army and police units so that they can take over from foreign troops, with President Barack Obama promising to begin pulling out some US forces by July 2011.

Violence has spiked in southern and eastern Afghanistan with US and coalition troops suffering record casualties over the summer.

A total of 326 US soldiers have been killed in the Afghan war in 2010, compared with 317 for all of 2009, according to AFP figures based on the independent icasualties.org website.

The number of international troops killed in Afghanistan so far in 2010 stands at 493, not far off the 2009 total of 521.

The commander of US and NATO forces in Afghanistan, General David Petraeus, has said coalition troops have seized the initiative against the Islamist insurgents.

The United States and NATO are building up their troop numbers in Afghanistan to almost 150,000, with Obama's surge of an additional 30,000 soldiers almost complete

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