Pakistan Prime Minister Nawaz Sharif, formally elected by parliament on Wednesday, again called for an end to US drone strikes aimed at militants which many view as a breach of Pakistan's sovereignty.
Ousted in a bloodless military coup in 1999, Sharif won enough seats in the May 11 general elections for his Pakistan Muslim League-Nawaz (PML-N) party to operate without a coalition. His government faces a range of challenges including increased militancy, sectarian violence, chronic power shortages, a near-collapsed economy, strained relations with key ally Washington and the task of building ties with India.
"This daily business of drones has to stop immediately," he told parliament. "Other countries must respect our sovereignty and address our concerns."
"I will not make any promises; the economy is in terrible shape," Sharif said in the address carried on TV. "I, my team will not sleep until we have resolved the problems. We want a Pakistan which is not known for corruption, poverty and violence but in fact for peace, good and clean government."
The new administration will need to bridge a budget gap that's at the highest in almost two decades and spur economic growth from an annual average of three per cent as energy shortages shut the grid for as much as 18 hours a day. Nationwide attacks by Taliban insurgents have killed 40,000 people since Pakistan decided to support the US war in Afghanistan after the September 11, 2001 attacks.
"It is going to be tough for Sharif to turn things around," said Raza Rumi, director of policy and programs at the Islamabad-based Jinnah Institute. "Riding a popular wave, it is highly unlikely that Sharif would annoy the electorate, especially his support base comprising the business class."
Power shortages
Sharif won today's ballot for prime minister in the 342- member lower house of parliament, securing 244 votes. The candidate for President Asif Ali Zardari's Pakistan Peoples Party, Makhdoom Amin Fahim, received 42 votes, while Makhdoom Javed Hashmi for the party of former cricket star Imran Khan got 31 votes.
Sharif has pledged to address chronic power outages, which the Planning Commission estimates sliced 2 percentage points off growth in the year to June 2012, shutting factories and spurring social unrest.
"In the short-run we will have to write a cheque to pay off a big pile of debt that has choked the whole system," Miftah Ismail, an energy adviser to Sharif, said by phone from Karachi yesterday. "That's more likely to be done by selling rupee bonds to local banks. After getting rid of this debt we will have to stop power theft, improve efficiencies and end subsidies for consumers who can afford higher costs."
Energy dues, known as circular debt in Pakistan, amount to $5 billion, as companies struggle to get customers to pay their utility bills on time, delaying payments to fuel suppliers and refiners.
Sharif's party's election manifesto outlines plans to switch from oil to coal-fired plants and add 10,000 megawatts of capacity by encouraging $20 billion in investment in the next five years.
Combating insurgency
Sharif has previously pledged to invite Taliban chiefs orchestrating the insurgency based in Pakistan's mountainous tribal regions along the Afghan border to peace talks. The Taliban, which had earlier released a video saying it was open to negotiations, scrapped the offer May 30 after the killing of its No. 2 commander in a US drone missile strike.
It was also the first reported U.S. drone strike since President Barack Obama announced that the US was scaling back its drone programme.
Despite a bloody Taliban campaign in the lead-up to the elections, in which more than 100 people were killed across the country, Sharif stopped short of mentioning the Islamist group in his inauguration speech.
"We have to end lawlessness and terrorism," he said. In his election campaign, Sharif offered to hold talks with the militants.
Washington has a long-standing alliance with the nuclear-armed country of 180 million, but ties have already been strained by concerns that Islamabad is supporting militants fighting U.S. troops across the border in Afghanistan.
Budget woes
Pakistan recorded the highest budget deficit in two decades in the fiscal year through June as it missed its tax target. The fiscal deficit may be 7.5 per cent of gross domestic product this year, wider than the government's target of 4.7 per cent, the International Monetary Fund in January.
"We will strengthen areas such as agriculture, industry and trade that will help Pakistan on its feet," Sharif said in his speech today. "Solid infrastructure will mean more jobs for the people and this will be a priority."
Sharif may have to negotiate a bailout with the IMF after foreign exchange reserves plunged 40 per cent from a year ago, to less than two months of imports, according to central bank data.
Sartaj Aziz, who served as finance minister under Sharif in the 1990s and is now an advisor, said the new government may not approach the IMF immediately.
"Our deficits are very large. If you go to the IMF straight away then the level of adjustments will be very large and the strings attached to the program will be very tough," Aziz said in a May 27 interview from Lahore, the capital of Punjab province. Sharif may decide "to first take economic remedial measures".
