At least 34 people were killed in a suicide bombing in Afghanistan's southern Helmand province on Thursday.

The bombing targeted Afghan troops and government employees waiting to collect their salaries ahead of Eidul Fitr, officials said.

Omar Zwak, spokesman for the provincial governor, said at least 34 people had been killed and more than 60 wounded, including members of the police and army, civilians and staff of the New Kabul Bank branch where the attack took place.

No group immediately claimed responsibility for the attack but Helmand has been at the centre of bitter battles between the Afghan Taliban and Afghan security forces, aided by Nato troops.

The insurgents, believed to control nearly 80 per cent of the province's countryside, have increasingly been pressing a push onto Lashkar Gah and its environs in efforts to take the city.

In recent weeks, the Afghan Taliban have overrun Helmand's key Sangin district, where both British and US troops had fought for years to keep them at bay.

Esmatullah, an Afghan border policeman, who was at the scene of the explosion, said the noise from the blast was deafening. He said many are missing in the ensuing chaos as witnesses, survivors and ambulances struggled to ferry first the most seriously wounded to hospital.

“We are taking children to the hospital,” said Esmatullah, who like many Afghans uses only one name.

Twelve-year-old Hosnia, was crying outside the bank as she searched for her father who had brought her to buy shoes ahead of the Muslim holiday.

“I couldn't find anyone, my brother and my father,” she said. “My father told me he will take me to buy shoes. We came here and then there was the explosion.”

Helmand is considered a key region because it is one of the largest opium producing provinces for the Taliban, who charge opium traffickers a hefty tax to move their contraband to market. Corrupt government officials also benefit from the production and trade of opium, the raw material used to make heroin.

Afghanistan is the world's largest opium-producing country, producing more than all other opium-producing countries combined, according to a United Nations estimate.

Meanwhile, a militant attack the previous night inside a mosque in the country's east killed two members of the local council.

Salim Sallhe, spokesman for the provincial governor in eastern Logar, said gunmen opened fire at worshippers during prayers at a mosque in Baraki district on Wednesday night. Two other local officials were wounded by the gunfire.

Sallhe said police are investigating. No group claimed the attack but Taliban spokesman, Zabihullah Mujahid, denied the insurgents were behind the shooting.