MANILA - The Philippine government has defended giving money to Islamist militants for the release of an Italian Red Cross worker held hostage for six months, denying it caved in to ransom demands.

A government negotiator revealed Sunday she gave 50,000 pesos (S$1,515) out of her own pocket to the Abu Sayyaf, blamed for most of the country's deadliest terrorist attacks, as a gesture of goodwill for releasing Eugenio Vagni.

"I don't think this amount was a substantive violation of our 'no-ransom' policy, if you look at the amount, the timing, the context," President Gloria Arroyo's spokesman Gary Olivar told reporters.

As part of the deal with the kidnappers, police handed over two wives of Abu Sayyaf leader Albader Paradover to the negotiator, Nur-Ana Sahidulla, a local official in Jolo island where the kidnappings took place.

The women were in custody after their arrest last week along with four other suspects in connection with the January 15 abductions of Vagni and two co-workers freed earlier in April.

It is unclear if police have dropped planned criminal charges against the women.

Olivar echoed Sahidulla's argument that the cash that changed hands "would only buy about 125 cartons of imported cigarettes".

The military had earlier warned negotiators about giving money to the gunmen, saying it would be used to buy guns and explosives that would kill more Filipinos.

Olivar compared the cash inducement as equivalent to seed money that Filipino well-wishers traditionally give to newlyweds.

The Red Cross reiterated on Sunday that it paid no ransom for the release of the 62 year-old hostage or those of his two colleagues.