Feb. 19 (Bloomberg) -- Pakistan's opposition parties won national parliamentary elections yesterday as voters sought an end to President Pervez Musharraf's eight years of military rule.

``It seems, according to predictions, that the opposition has won,'' Tariq Azeem, a spokesman for the pro-Musharraf Pakistan Muslim League-Quaid-i-Azam, said by telephone from the capital, Islamabad.

Former Prime Minister Mohammad Nawaz Sharif said he will work with the late Benazir Bhutto's Pakistan Peoples Party and other victorious parties to end ``dictatorship forever'' in Pakistan. The two main political groups will need to woo allies and independent candidates to secure the two-thirds of seats needed to reverse constitutional changes that have kept Musharraf in power since a 1999 military coup.

``There has been an anti-incumbency swing, and it looks like it's of a big magnitude,'' said Haris Gazdar, a Pakistani political and economic researcher at the London School of Economics.

Stocks rallied, with the benchmark index posting its biggest gain in more than six weeks.

War on Terror

The election will also reshape a key front in the U.S.-led war on terror by sweeping away the Islamic government of the North-West Frontier Province, which borders Afghanistan. The U.S., which has pumped $10 billion into Pakistan since the Sept. 11 terrorist attacks, has claimed the Taliban operates freely in the border region.

``At the end of the day, we hope that they continue to work with us as partners in counter-terrorism,'' White House spokeswoman Dana Perino told reporters traveling with President George W. Bush to Ghana. ``The threat from extremists is just as grave and very immediate for the people of Pakistan.''

Whether Musharraf's power has been weakened isn't clear, she said. The elections ``seem to have been largely fair, and people were able to express themselves,'' she said.

Pakistani newspapers in front-page headlines said the party backed by Musharraf was wiped out in the vote.

``All the King's Men, Gone,'' wrote the Daily Times newspaper. ``Democracy Takes Revenge,'' according to The News headline, alongside an editorial calling for the president to quit.

`Verdict Against Musharraf'

``This is a verdict against Musharraf and his policies,'' Pakistan Peoples Party spokesman Farhatullah Babar said in a phone interview. ``Musharraf himself had promised that if parties opposing him came into power he would resign. Now he should honor his promise.''

Still, even a landslide opposition victory won't necessarily dislodge the president. Musharraf, 64, has the constitutional authority to dissolve Parliament and just before the Supreme Court was scheduled to rule on his re-election in November he sacked the bench and suspended the constitution.

``There is no element in the election to suggest Musharraf has lost,'' the president's spokesman Rashid Qureshi said in a phone interview from the capital. Musharraf is the elected president for a five-year term, he said.

U.S. Senator John Kerry told reporters in Islamabad the election was fair and Musharraf accepted the results. The president will respect the powers of the new prime minister and work with the incoming government, Kerry said.

Moved Into Lead

With 258 of 268 constituencies reported, Bhutto's party moved into the lead with 87 seats and Sharif's group won 66, according to the independent GEO Television's Web site. Four constituencies postponed the election because of violence or the deaths of candidates.

The pro-Musharraf party won in 38 constituencies, Geo said. The official Election Commission tally showed Bhutto's party with 72 seats, Sharif's party with 57 seats and Musharraf's backers with 26 victories out of 212 parliamentary seats.

Sharif said the decision to seek Musharraf's removal or impeach him will be decided in consultation with other parties.

``It is the need of the hour that all democratic forces should join so that it becomes impossible for Musharraf to stay on,'' said Iqbal Zafar Jhagra, secretary general of Sharif's Pakistan Muslim League. ``If at all the PML-N joins the government, that will only be possible if Musharraf goes.''

Musharraf has lost support since March, when he began trying to oust the independent-minded Supreme Court chief justice, and opposition increased in November when he imposed emergency rule. His popularity also has been further undercut by former prime minister Bhutto's Dec. 27 assassination while campaigning. That hurt his allies in the election.

Supporters Ousted

Sheikh Rashid Ahmed, who served in Musharraf's Cabinet, lost in both constituencies where he ran in the city of Rawalpindi, Dawn News reported. Chaudhry Shujaat Hussain, president of the Muslim League-Quaid-i-Azam, lost in his hometown of Gujrat, according to Dawn and Geo News.

Neither Sharif nor the leader of Bhutto's party, her husband Asif Ali Zardari, 51, were on the ballot. Makhdoom Amin Fahim, the PPP's vice chairman, is the probable choice as the next prime minister.

Fahim, 68, who led the party for seven years while Bhutto was in exile, was elected in his hometown. Party activists gathered across rural Sindh to celebrate the party's victory. Hundreds of supporters waved the red, green and black striped party flag and danced to pro-Bhutto songs, Dawn News reported.

Zardari invited political groups to build a national coalition government.

``We will form the government in the center and all the four provinces with the help of our allies,'' Zardari told reporters in Islamabad today. ``The party is yet to decide who will be the leader of the house.''

Karachi Vote

Altaf Hussain, the leader of the Muttahida Qaumi Movement, which traditionally wins in Karachi and other parts of urban Sindh, said his party is willing to work with Bhutto's and Sharif's parties, GEO reported. Hussain's party was a member of Musharraf's coalition government.

Musharraf emphasized his economic record to attract voters to parties that support him. The country's gross domestic product has doubled to $146 billion since 1999 with average annual growth of 7.5 percent in the past four years.

The opposition parties say the benefits of economic growth haven't trickled down to the general public, which faces wheat- flour, electricity and gas shortages amid inflation.

An estimated 81 million Pakistanis were registered to vote for 272 lawmakers in the 342-member parliament. The remaining 70 seats will be filled by women and minorities picked by legislators later. In five elections since 1988, voter turnout has been between 30 and 40 percent.

Border Violence

The North-West Frontier Province, dominated by the Pashtun ethnic group, turned away from the main Islamic religious party, which has given support both to the Taliban and to Musharraf.

The Jamaat-i-Ulema-i-Islam formed the core of a pro-Taliban coalition that won control of the provincial government in the last elections in 2002. With almost half of the province's voting results announced, secular, anti-Taliban parties were winning about two-thirds of the legislative seats and are poised to form the next provincial government.

``A secular government is a very, very positive development,'' said Hassan Abbas, a researcher on political and security issues at Harvard University. ``There is now a much better opportunity'' to oppose the growing influence and violence of the Taliban and allied militant groups in the province, Abbas said.

The U.S. should triple non-military assistance to Pakistan as a ``democracy dividend'' after parliamentary elections, Senator Joseph Biden, the chairman of the Foreign Relations Committee, said.

The U.S. should use the election as an opportunity to re- focus policy away from one person to working with all people, Biden told a press conference in Islamabad.

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

Last Updated: February 19, 2008 14:11 EST