Bloomberg News

Sharif Set to Be Pakistan Premier Again as Economy Stalls (3)

May 13, 2013

Nawaz Sharif

Nawaz Sharif, leader of the Pakistan Muslim League-Nawaz party, will face the challenge of reviving economic growth in the world’s second-most populous Muslim nation which has slowed to an annual average of 3 percent since 2008 as a power crisis shuts the grid for up to 18 hours a day. Photographer: Daniel Berehulak/Getty Images

Nawaz Sharif was headed for a record third term as prime minister of Pakistan as unofficial results from a landmark election gave him the convincing win he sought to tackle a slumping economy and growing militancy.

Sharif’s Pakistan Muslim League-Nawaz dominated its Punjab bastion in the May 11 poll, reduced its chief rival to a third of its previous strength in parliament and may be able to govern without the help of a major coalition partner, according to the tally by state-run Pakistan Television.

“This is an ideal and a graceful victory for Sharif,” said political analyst and retired army General Talat Masood in a phone interview in Islamabad yesterday. “He will form a strong government at the center, which is badly needed to tackle some enormous economic and security challenges.”

Sharif, 63, will face the challenge of reviving economic growth in the world’s second-most populous Muslim nation which has slowed to an annual average of 3 percent since 2008 as a power crisis shuts the grid for up to 18 hours a day. Taliban insurgents whose fight to impose Islamic rule rages near the Afghan border marred the election campaign with attacks that killed 151 people, many of them in Karachi.

Sharif, with 127 lawmakers, was set to beat both established and emerging opponents: The Pakistan Peoples Party of President Asif Ali Zardari, which led the last government, had 31 members in the lower house of parliament, the PTV tally showed. Imran Khan, a cricket legend who had promised a “tsunami” to sweep the old guard from power, stood on 34 lawmakers. A further 70 seats are reserved for women and religious minorities and will be awarded later.

Shares Surge

Pakistan’s benchmark share index extended its rally in the first day of trading after the election, rising as much as 1.6 percent, the most in almost six weeks, to a record.

Standard & Poor’s Ratings Services said in a statement from Singapore today that Pakistan’s election results set the stage for longer term stability for the country’s sovereign rating of B minus, six levels below investment grade.

“This is a key achievement for Pakistan’s maturing democracy,” Credit Analyst Agost Benard wrote in the statement. “We believe the election outcome puts the incoming government in good stead to sew up” a deal with the International Monetary Fund soon.

Sharif received congratulations and an invitation to visit from Indian Prime Minister Manmohan Singh, who said he hoped the countries could pursue “a new destiny in relations,” which have been bedeviled by wars, decades of mistrust and a 2008 terrorist attack on Mumbai.

Power Transfer

The ballot marked the first time a civilian government completed its term and transferred power to a successor. Pakistan has been ruled for half its history by the military.

U.S. Secretary of State John Kerry said Pakistan’s people had shown resolve against threats by extremists. The vote turnout was about 60 percent, according to the Election Commission, up from 44 percent in 2008.

If Sharif is to turn his poll success into a stable government, he’ll have to deliver on promises to overhaul the economy and tackle militancy, and show he learned from his previous two periods in charge.

While unlikely to need the support of larger parties, he may need to woo smaller regional groups and independents to help him pass legislation.

Corruption Allegations

Sharif’s first administration from 1990-1993 was cut short by corruption allegations, and his second by Pervez Musharraf’s 1999 coup after he attempted to remove the military chief as he returned from a trip to Sri Lanka.

“Sharif’s problem has been not realizing the power and autonomy of institutions,” said Riaz Hassan, visiting research professor at the Institute of South Asian Studies at the National University of Singapore, by phone from Adelaide. Last time he governed, “in a very short period of time he alienated the Supreme Court and the military. I hope he has learned his lessons.”

Sharif said in a recent interview with the Geo channel he’d hire professional managers for loss-making state companies and end the cycle of debt that has crippled electricity generation and transmission companies. He also plans to ramp up lending for small businesses.

Energy Reform

“His party has the support of most businessmen,” Anatol Lieven, a professor at London’s King’s College and author of “Pakistan: A Hard Country,” said yesterday by phone. “His election manifesto is more specific and serious than other parties when it comes to reform of the energy sector and privatization.”

Economists including Sakib Sherani, Islamabad-based chief executive officer at Macro Economic Insights, say he will also need to secure another bailout from the IMF as early as June to service debt payments as foreign exchange reserves have plunged 40 percent from a year ago, according to central bank data.

One of Sharif’s key aides, Chaudhry Nisar Ali Khan, said in an interview with Bloomberg in Rawalpindi last month the PML would cut taxes on manufacturing and stem losses at state-run companies.

“It is our party which initiated privatization, opened up the economy, brought in private banks, private insurance companies” when in power in the 1990s, Khan said. “So we know what we are talking about.”

Sharif ended state monopolies in shipping, airlines and telecommunication. He ordered nuclear tests in 1998, weeks after rival India.

Military Government

The eldest son of a wealthy business family, Sharif entered politics under the military government of General Muhammad Zia-ul-Haq. He became finance minister of Punjab in 1983 and later its chief minister, according to the PML’s official website.

After Zia’s death in a plane crash in 1988, Sharif alternated two terms as prime minister with his main rival, Benazir Bhutto of the Peoples Party before being ousted in a coup by military chief

Sharif’s efforts to improve infrastructure and governance in Punjab, where his party has ruled since 2008, boosted his election performance, said Muhammad Waseem, a political science professor at the Lahore University of Management Sciences.

“His credibility will be at stake if he is unable to quickly fix power companies and reduce blackouts,” Waseem said. “This is something which is affecting every citizen every day.”

Unwinding a web of extremist groups may prove an even bigger challenge, said Lieven.

Peace Talks

Like the party of Imran Khan, the PML-N has called for peace talks with the Pakistani Taliban, something that has been tried before and has failed, Lieven said.

“The Pakistani Taliban made bigger and bigger gains,” he said from London. “There is a real risk that will start happening again” if military offensives cease.

Pakistan’s army dominates security policy and has its own links to extremist groups that have been enmeshed in conflicts in India and Afghanistan. In Punjab, Sharif’s provincial administration has failed to crack down on militant groups like Lashkar-e-Taiba, which India blames for the three-day siege of its finance capital.

Sharif would seek the support of military commanders and political rivals to counter extremism, the PML-N’s Khan said in the April interview. The “government of the day and the armed forces’ leadership must sit together and be clear as to who are with us and who are against us.”

To contact the reporters on this story: Haris Anwar in Islamabad at hanwar2@bloomberg.net; Khalid Qayum in Singapore at kqayum@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net


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