The explosion occurred at the Eidgah market in Kurram Agency's Parachinar area which was bustling with people who were out shopping for clothes.
Twenty-three people were killed and 55 others injured, including 15 who were in a critical condition, officials said. It was unclear whether the blast was a suicide attack or a remote-controlled blast. Security forces cordoned off the area and were investigating the nature of the blast.
However, media reports said the explosion was carried out through a planted device and two suspects have been taken into custody from the blast site. No individual or group claimed responsibility for the attack.
Earlier, rescue and emergency teams rushed to the blast site and shifted the dead and wounded to a hospital in Parachinar.
Kurram is one of the most sensitive tribal areas as it borders three Afghan provinces and at one point was one of the key routes for militant movement across the border. It has witnessed scores of sectarian attacks and kidnappings in the past several years.
The agency is adjacent to North Waziristan where Operation Zarb-i-Azb is in progress against the Tehrik-i- Taliban and other insurgent groups.
Parachinar is the administrative headquarters of the agency near the Afghan border. It is a small garrison town with a total population of about 40,000 comprising people of different tribes, races and faiths.
Image for representation only.
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