Intense gunbattles are underway in Libya's coastal city of Sirte, where provisional government forces relaunched their offensive against fighters supporting former leader Moammar Gadhafi after die-hard loyalists had pushed them back.

National Transitional Council fighters said Wednesday they have confined Gadhafi loyalists to a small portion of one neighborhood but continue to face stiff resistance.

The NTC has said capturing Mr. Gadhafi's hometown of Sirte would allow them to declare the country liberated.

Also Wednesday, acting Libyan Prime Minister Mahmoud Jibril was quoted by the pan-Arab Asharq al-Awsat newspaper as saying Mr. Gadhafi is moving between Niger, Algeria and Libya's vast southern desert.

Mr. Jibril said the ousted leader has been trying to recruit fighters from Sudan to help him establish a separate state in the south, or to march north to destabilize the new government. He said Mr. Gadhafi is seeking to return to power by exploiting the political divisions among revolutionary forces. The report could not be confirmed.

On a visit to Libya Tuesday, U.S. Secretary of State Hillary Clinton echoed concerns about Mr. Gadhafi, saying she hoped he would be captured or killed.

During her trip, Clinton pledged millions of dollars in new aid for educational programs and medical care for wounded fighters. She also said more money will go toward securing stockpiles of weapons from Mr. Gadhafi's rule and destroying chemical weapon stocks.

U.S. officials say American aid to Libya since the conflict began totals $135 million.