Sept. 6 (Bloomberg) -- Asif Ali Zardari, widower of Benazir Bhutto, was elected president of Pakistan, solidifying his grip on power in the nuclear-armed nation that's grappling with rising extremism and a crumbling economy.

``My victory is the peoples' victory and the victory of democracy,'' Zardari, co-head of the governing Pakistan Peoples Party, told state-run Pakistan Television. Zardari secured 479 out of 702 electoral votes from lawmakers in both houses of parliament and the four state assemblies, PTV said.

Zardari, 52, replaces Pervez Musharraf with a mandate to tackle soaring inflation and provide food for the two-thirds of the population who live on less than $2 a day. A gun attack on the motorcade of PPP Prime Minister Yousuf Raza Gilani this week underscored the need to improve security in a nation that saw 2,000 people killed in terrorist attacks last year.

``The issue is not whether Zardari may or may not deliver on the economy, the issue is what are his priorities,'' said Asif Ali Qureshi, head of research, at Invisor Securities Ltd. in Karachi. ``Complacency is not an option.''

Zardari's election was opposed by his former ally Nawaz Sharif, 58, whose faction of the Pakistan Muslim League nominated ex-chief justice Saeed-uz-Zaman Siddiqui. Former premier Sharif quit the almost six-month-old alliance Aug. 25 after Zardari reneged on pledges to reinstate judges fired by Musharraf and on his candidacy for the president's election.

`Without Reservation'

``We should all accept the result without reservation,'' Siddiqui told reporters in Islamabad. ``Pakistan has to grapple with grave problems and so we all have to work together.''

The Pakistan Muslim League faction that supports Musharraf had nominated Mushahid Hussain for the slot. Siddiqui won 153 electoral votes and Hussain secured 43, state-run TV said.

Local television channels broadcast images of PPP supporters dancing outside parliament and waving the black, red and green striped party flag. Crowds chanted slogans ``long live Benazir'' and played PPP songs in all the major cities.

Zardari's daughters, Bakhtawar and Asifa, who watched the vote from the parliament's visitors' gallery holding a framed photograph of Bhutto, cheered and flashed the victory sign when the result was announced.

U.S. Secretary of State Condoleezza Rice praised Zardari's comments on the importance of fighting terrorism and said it was the Pakistan's own fight as well as that of the U.S. and the rest of the world.

``With the new president I think we've got a good way forward,'' Rice told reporters traveling with her in North Africa. ``I was impressed with some of the things he said about the challenges that Pakistan faces.''

Unifying Policies

Zardari's election may unify the government's policies in fighting terrorists operating on the border with Afghanistan, as Sharif's party favors negotiations over military action.

The PPP-led government last month seized bank accounts and assets of Tehrik-e-Taliban Pakistan, an alliance of five pro- Taliban groups formed in December, which has claimed responsibility for terrorist attacks in Pakistan.

The paramilitary Pakistan Rangers were deployed outside Parliament in Islamabad today to prevent terrorist attacks during the vote. At least 15 people, including five security officials, were killed and several others injured in an explosion in the northwestern city of Peshawar today, GEO television reported, citing unidentified police officials.

``I will work to defeat the domestic Taliban insurgency,'' Zardari wrote in an article on The Washington Post's Web site on Sept. 4. ``The war we are fighting is our war. My party and I are struggling to save our nation.''

Parliamentary Elections

The PPP won the most seats in Feb. 18 parliamentary elections, followed by Sharif's party, after Bhutto was killed in a Dec. 27 terrorist attack on her election rally. The two parties united in March and formed the government led by Gilani.

Zardari was virtually assured the presidency after smaller groups, including the Karachi-based Mutahidda Qaumi Movement, Jamiat Ulema-e-Islam and the Awami National Party, both based in the North West Frontier Province, said they'd back his candidacy.

Pakistan's economy expanded 5.8 percent in the fiscal year ended June 30, the slowest pace since 2003, and the trade deficit widened to a record $20.7 billion.

Inflation accelerated to 24.3 percent in July and foreign- exchange reserves have declined by more than half. Moody's Investors Service last month said reserve depletion was the ``most imminent risk.''

Last week, Pakistan's government debt was judged to have become the world's riskiest, based on the price of protecting it through credit-default swaps.

Reviving Growth

Both Zardari and Sharif say that to revive growth they will pursue the economic liberalization, including sales of shares in state-owned companies, begun in the 1990s. Occupied by their power struggles this year, neither has unveiled a detailed set of policies, and the government is struggling to avoid defaulting on debts.

Zardari's victory caps the rise of a man who spent 11 years in prison for alleged kickbacks that earned him the nickname ``Mr. 10 Percent.'' He was born in 1956 to a wealthy landholding family in Nawabshah, in southern Sindh province, and settled in Karachi to dabble in the family business and play polo.

He was catapulted into Pakistani headlines in 1987 when Bhutto's mother arranged for her daughter to marry him. Benazir Bhutto's father, Prime Minister Zulfikar Ali Bhutto, had been executed in 1977 after a military coup. Zardari played a minor role in Bhutto's first government, from 1988 to 1990, and was minister for investment in her second term.

Corruption Charges

Sharif twice succeeded Bhutto and Zardari was arrested on corruption charges by neutral interim governments. In 1999, Musharraf toppled Sharif in a coup, with Zardari still appealing for his release from jail. He was freed in 2004.

Zardari, whose graft conviction was overturned, denies all charges of corruption. Musharraf, 65, gave him and his wife an amnesty in October as part of the deal that brought her back from exile to contest elections. She was assassinated by suspected Taliban members, two months before the PPP and Muslim League triumphed in a landslide vote.

After Bhutto's assassination, her will designated Zardari to lead their party. Zardari named the couple's 19-year-old son, Bilawal, the official chairman and said he would be in charge until his son completed study at the U.K.'s Oxford University.

To contact the reporters on this story: Khalid Qayum in Islamabad at kqayum@bloomberg.net; James Rupert in Islamabad at jrupert3@bloomberg.net.

Last Updated: September 6, 2008 11:09 EDT