WASHINGTON - Nearly seven years after their ouster by US forces, the Taliban have regrouped and have formed a "resilient insurgency," according to a new Pentagon report on security in Afghanistan. The report comes as Pakistani forces moved against the Taliban in the Khyber Agency threatening the city of Peshawar. Citing a weak Afghan government, struggling economy, massive increases in illegal narcotics production, corruption, growing attacks by insurgents and an increase in civilian casualties, US defence officials said incremental progress in Afghanistan contrasts with significant challenges ahead.  The 72-page report, which reviews the war from 2001 through April 10, 2008, offers a bleak assessment of a conflict that commanders think requires more resources and attention. "The Report Toward Security and Stability in Afghanistan," the first progress report to Congress, says that although there has been some progress in battling the Taliban, setbacks are expected. Although NATO and Afghan force operations kept the insurgency down in 2007 by killing or capturing key leaders and clearing out Taliban safe havens, the report predicted that the Taliban would be back in 2008. "The Taliban is likely to maintain or even increase the scope and pace of its terrorist attacks and bombings in 2008," the report said. The report looks at the progress through April, before the rise in violence seen over recent weeks. On June 14, a suicide bomb at an Afghan prison in Kandahar freed hundreds of Taliban prisoners. There also have been numerous attacks on the restive Afghanistan-Pakistan border in recent weeks. There are 32,000 US troops in Afghanistan. About 14,000 serve as part of the larger NATO force, and 18,000 are separate, involved in training and on counterterrorism operations. The report's authors highlight the eastern border town of Khost as an example of success by coalition forces. Once considered to be an ungovernable insurgent stronghold, the city has been turned around by security and reconstruction efforts, they say. But the report seems a bit outdated. "It actually was not bad until a few months ago," Defence Secretary Robert Gates said this week. "This is a fairly recent phenomenon of seeing the numbers come across the border. After all, Khost was an example of a successful counterinsurgency." The report's predictions for 2008 seem to be holding true. It describes a two-front insurgency, with the Taliban ruling in the south and a partnership of insurgent groups including al Qaeda in the east. The confederation is made up of both Afghan and Pakistani-based groups with the shared goals of expelling outside military forces and the "imposition of a religiously conservative Pashtun-led government," it said. The Pentagon report also says the progress of the Afghan army and national police is slow because of a lack of trainers and corruption. Counter-narcotics also suffered a setback: Opium production increased "substantially" in 2007, the report says. "Counter-narcotics efforts have resulted in gains over the past six years [but] the battle against drug traffickers is ongoing, and will be for some time," it says. According to a 2007 U.N. survey, about a quarter of the earnings from opium go to farmers. The rest goes to district officials who collect taxes on the crop, to drug traffickers and to the insurgents and warlords who control the trade. Taliban militants have increased their attacks this year. The top US commander in southeastern Afghanistan, Maj. Gen. Jeffrey Schloesser, said Tuesday that attacks on his troops were up 40 percent in the first five months of 2008. The latest casualty came when a coalition service member on a reconnaissance patrol in western Afghanistan was killed Thursday, the US-led coalition said Friday. The incident took place in the Gulistan District of Farah province. Five coalition and two Afghan soldiers were wounded. Three US-led troops southwest of Kabul in Wardak province were also killed Thursday. US Defense Secretary Robert Gates said Thursday that one of the reasons for the increase was that more people are "coming across the border from the frontier area [of Pakistan]." Gates said he hoped a newly announced Pakistani effort to clamp down on Islamic militants in the country's northwestern tribal districts would improve the situation in Afghanistan. "The ability of the Taliban and other insurgents to cross that border and not being under any pressure from the Pakistani side of the border is clearly a concern," Gates said. The number of US and allied troops killed in Afghanistan in June has reached 40, the highest monthly toll of the 7-year-old war. One of the weapons of choice for militants in Afghanistan is the roadside bomb. Pentagon figures detailing the number of roadside bombs detonated and found in Afghanistan illustrate the level of insurgent activity. In 2007, 876 roadside bombs blew up, and 439 were found. This year, 431 have blown up, with 354 found.