Mr Asif, however, did not specify the name of the terrorist nor did he name the “National Security Advisor” who he said had made the proposal.
“The terrorist who killed children in APS (Army Public School) in Peshawar is in Afghan custody. The National Security Advisor (NSA) told me that we can exchange that terrorist with the terrorist you have, which is Kulbhushan Jadhav,” Mr Asif told the audience after his speech at the Asia Society in New York on Monday.
He discussed Pakistan’s vision for and approach towards regional peace and development during his conversion with author and journalist Steve Coll.
Mr Asif said Pakistan had suffered grievously from conflict and instability in Afghanistan.
“Unless this cycle is reversed, we would continue to bear the brunt. No country, therefore, has a larger stake in seeing peace and stability return to Afghanistan than Pakistan. Regrettably, the situation in Afghanistan is getting worse,” he said.
Mr Jadhav, a 46-year-old retired Indian Navy officer, was in April sentenced to death by Pakistan’s Field General Court Martial on charges of his alleged “involvement in espionage and sabotage activities” against Pakistan.
India has accused Pakistan of violating the Vienna Convention by repeatedly denying consular access to Jadhav.
In a hearing of the case on May 18, a 10-member bench of the International Court of Justice stopped Pakistan from executing Mr Jadhav.
Pakistan has said that the Indian national would not be executed until he has exhausted his mercy appeals.
The Pakistan Taliban had claimed responsibility for the gruesome Peshawar school attack in 2014 in which nearly 150 people, mostly school children, were killed.