June 18 (Bloomberg) -- Pakistan's Prime Minister Shaukat Aziz said the biggest protests in his eight years in government aren't serious enough to curb record overseas investment needed to sustain economic growth.

``Despite some blips which happen in any developing country, we have been vindicated because we have maintained our credit ratings, investment flows and growth momentum,'' Aziz said in an interview in Islamabad on June 17. ``The judiciary issue is a serious matter, but 20,000 people demonstrating in a country of 160 million is not what we would call an uprising.''

Aziz, 58, a former Citibank executive, is betting sales of 61 state-owned companies and the stock market at an all-time high will help sustain overseas investment estimated to reach a record $6.5 billion this fiscal year. Still, escalating protests over the removal of Chief Justice Iftikhar Muhammed Chaudhry in the run up to nationwide elections in January may curb inflows.

``The appetite for political risk in emerging markets is higher but if politics had been more subdued, we could have attracted a lot more investment,'' said Nadeem Naqvi, chief executive officer of AKD Securities Ltd., in Karachi.

Investments worth ``billions of dollars'' will come into power generation, hotels, the stock market, cement and banking, said Aziz, who became Prime Minister in 2004 after serving almost five years as finance minister.

Power Deficit

Pakistan needs overseas funds in power projects because demand is forecast to rise at an annual pace of as much as 12 percent in the next three years, Aziz said. Demand for electricity rose 20 percent in the year ending June 30, more than twice the pace projected, he said.

``People have the money to buy electricity, demand has been much higher than all of us expected so we have to gear up,'' Aziz said. Demonstrators have burned tires and staged protests in Karachi since May to protest against power outages lasting as long as eight hours a day in the country's commercial capital.

``Power is the single biggest hurdle confronting the economy,'' said Naqvi. ``My fear is that as pressure increases, the government will panic, cut unattractive deals and pay too much to the private sector for power.''

The government estimates foreign investment will rise from $3.8 billion in the fiscal year ended June 30 to spur economic growth to 7.2 percent from 7 percent. Pakistan needs political stability to ensure overseas investors join Standard Chartered Plc., China Mobile Ltd., and Emaar Properties PJSC and sustain economic growth that averaged 7.5 percent in four years.

Reforms `Institutionalized'

``Pakistan's reform has been institutionalized to a large extent and codified in the law,'' said Aziz. ``The law can be changed by Parliament but then the government of the day will have to explain to the public and the world at large.''

Rising investment and improved living standards may help President Pervez Musharraf, who is facing violent opposition to his rule after he removed Chaudhry in March. The president is seeking re-election before January's parliamentary polls.

Elections will be ``held on time and will be free and fair,'' Aziz said. Former Prime Minister Benazir Bhutto, who lives in exile in Dubai and London, will ``take her own decision to come or not to come, based on some legal challenges she has to overcome,'' Aziz said.

Faster growth is fuelling inflation, which has averaged almost 8 percent in the past year, compared with 2.5 percent at the time of the last parliamentary elections in 2002. That's increasing food prices in a nation where about 70 percent of the population lives on less than $2 a day.

Wheat, Cotton

Agriculture businesses in dairy, livestock and the farming of minor crops like tomatoes, potatoes and onions will be encouraged to help reduce food prices, Aziz said.

``We're getting out of the four-crop syndrome,'' he said. Pakistan's major crops are wheat, cotton, rice and sugar.

The South Asian nation's farm sector, which accounts for one-fourth of gross domestic product, is estimated by the government to have expanded 5 percent in the year ending June 30 because of a record wheat harvest.

Pakistan's exports will see ``double-digit growth'' in the year starting July 1, as textile shipments rise and the nation sells more sporting goods, surgical instruments and marble overseas, Aziz said.

The trade deficit widened to $12.3 billion in the 11 months ended May 31, exceeding the government's target of $9.4 billion, according to the Federal Bureau of Statistics. Exports rose 3.6 percent to $15.5 billion.

Export Target

The government will set an export target for next year in its annual trade policy announcement in July.

Pakistan will take advantage of heightened overseas interest to sell $500 million in foreign-currency bonds next year through a Sukuk or conventional bond sale, Aziz said. The nation last month raised $750 million selling foreign currency bonds in its fourth debt offering in three years.

Standard & Poor's raised Pakistan's long-term foreign currency credit rating one level to B+ in November 2004. S&P had lowered Pakistan's sovereign rating to within two levels of default status in October 1998. Moody Investors Service raised its ratings on Pakistan's foreign-currency bonds to B1 in November 2006, three years after the previous increase.

To contact the reporter on this story: Naween A. Mangi in Islamabad, Pakistan on nmangi1@bloomberg.net

Last Updated: June 18, 2007 07:28 EDT