WASHINGTON -- The United States is expected to lift two sets of sanctions against Libya and may take action in the next few days, an administration official said Tuesday. The move would be a follow-up to Libya's decision to dismantle its unconventional weapons program, and other gestures. The official, asking not to be identified, said a final decision on the sanctions will be made by President Bush. At issue are sanctions imposed under the Iran-Libya Sanctions Act and the International Economic Emergency Powers Act.

State Department spokesman Richard Boucher noted Tuesday that President Bush has said he will reciprocate for Libyan disarmament efforts.

In that connection, Boucher said, "We have been looking at potential measures to normalize trade and investment."

Meanwhile, Libya has agreed to a three-month extension on the April 24 deadline by which the United States was to have lifted the sanctions in return for Libyan compensation payments to families of Pan Am 103 victims.

A family member, asking not to be identified, said the decision on the extension was conveyed by Libyan officials to lawyers representing the families.

At stake is the release of $4 million to each of the 270 families of those killed in the bombing of Pan Am flight 103.

The funds are part of a $2.7 billion compensation package, or $10 million per family.

The families received an initial disbursal of $2 million each last year. Assuming the $4 million is paid this summer, that would leave a balance of $2 million. Those funds would be distributed once Libya is removed from the list of state sponsors of terrorism.

Boucher said Libya has curtailed support for international terrorism but continues to maintain contact with some past terrorist clients.

Combined, the sanctions against Libya impose severe curbs on U.S. trade and investment in Libya. The Bush administration recently lifted a ban on using U.S. passports for travel to Libya.

Libyan leader Moammar Gadhafi has garnered considerable international backing with his decision to abolish weapons of mass destruction and to accept responsibility for the 1988 Pan Am 103 bombing.

He also has taken steps to ease repression in Libya. Last month, he permitted a visit by a delegation from Amnesty International, the first such visit in 15 years.