South Korea and the United States were seen Saturday to be nearing an agreement on sharing the cost of keeping U.S. troops here, with the two sides overcoming their differences on the size of Seoul's contribution, defense sources said.

The allies will discuss the wording of the new deal when they meet for their third day of negotiations later in the day at the foreign ministry's headquarters in central Seoul, according to the sources.

The countries opened their 10th round of talks on Thursday to renew the Special Measure Agreement (SMA), after the previous five-year contract expired at the end of last year.

On the most contentious issue of how much South Korea should contribute to the cost of stationing 28,500 American troops here, the allies have reportedly reached a compromise midway between their proposed sums, namely about 930 billion won (US$876.5 million).

The U.S. had demanded South Korea contribute about 950 billion won under a new agreement, up sharply from the 869.5 billion won that Seoul paid last year under the previous agreement, citing increased North Korean threats and U.S. fiscal difficulties.

Seoul had proposed around 900 billion won.

Both side were also seen to have agreed to overhaul the way the U.S. uses the defense funds in order to improve transparency in a renewed deal reportedly to last another five years.

Civic activists and lawmakers here have demanded such measures after data showed that the U.S. is sitting on more than 1 trillion won of unspent defense funds, paid by Seoul.

The renewal needs to be ratified at the National Assembly before going into effect here.

Experts anticipated a parliamentary controversy over the expected renewal, citing the increase in the size of local contributions.

Since forging their first SMA in 1991, South Korea has shouldered part of the defense cost, and its share has increased every few years when the military agreement has been renewed.

The last deal inked in 2009 expired last year.(Yohhap News)