The United Nations is withdrawing its international staff from Pakistan's dangerous north-west and suspending long-term development work because of the wave of militant violence sweeping country – the latest instance of which saw at least 35 people killed yesterday when a suicide bomber detonated a device outside a busy bank.

In a move that marks a considerable blow to efforts to use aid and development to counter extremists, the world body said that, having already lost 11 members of its staff in Pakistan, the security rating of the north-west had been increased to "phase four" out of a possible five. The organisation only considers places such as Mogadishu to be more perilous.

"The international staff who have been involved in development programmes in the tribal areas and the North West Frontier Province (NWFP) are being immediately relocated," said Ishrat Rizvi, a UN spokesperson in Islamabad. She said she was unsure precisely how many people were being moved, but said it was a relatively small number. "Eleven UN staff have lost their lives in the past year in these incidents," she added, "but we are determined to continue our humanitarian work."

Download the new Independent Premium app Sharing the full story, not just the headlines

The decision by the UN, which followed an attack on a World Food Programme office in Islamabad last month in which five people were killed, came as militants struck again. Three dozen people waiting outside a bank in Rawalpindi, the garrison city near Islamabad, were killed when a man on a motorbike detonated a bomb. Yesterday was pay day and many people had gathered outside the branch of the National Bank, close to military headquarters, to get their salaries. A number of military personnel were among those killed in the blast, which also injured around 50 people.

"I was sitting on the pavement outside to wait for my turn," Mohammed Mushtaq, a soldier who suffered a head injury, told the Associated Press. "The bomb went off with a big bang. We all ran. I saw blood and body parts everywhere."

Meanwhile last night at least seven people were injured when a suicide bomber attacked a police checkpoint near the city of Lahore.

Witnesses said a car drove towards the checkpoint and then exploded. Pakistan has been beset by violence in recent weeks, with more than 300 people killed in a series of militant attacks in cities across the country that were apparently launched in retaliation for the major offensive being carried out by the Pakistani military in South Waziristan. Targeting both Taliban and al-Qa'ida fighters, the army operation comes amid intense pressure from the US government to confront militants responsible for carrying out cross-border attacks on Western troops in Afghanistan.

In turn, militants apparently hope their attacks will undermine public support for the military operation and distract the authorities. As such, the decision by the UN will be a big disappointment to those hoping that development work in Pakistan's remote and impoverished tribal areas could help counter the lure of extremism.

Many experts have stressed the need for better government services, law and order and infrastructure in an area that has long been ignored by the authorities. Imtiaz Gul, an analyst and author of The al-Qa'ida Connection: The Taliban and Terror in the Tribal Areas, said: "What a country like Pakistan needs is long-term commitment and engagement for helping with development issues rather than a knee-jerk reaction because one or two people are being killed. Our people are being killed every day. In a situation like this, a country like Pakistan would be left fending for itself. How can people expect the country to improve?"

The decision by the UN will certainly be greeted with consternation by Barack Obama's administration, whose plans for both Pakistan and Afghanistan are facing more and more challenges every day.

Yesterday, the Pakistan government said it understood the reasoning behind the UN's decision to withdraw its international staff but hoped its work would resume once the Waziristan operation was completed.