June 6 (Bloomberg) -- Nawaz Sharif took office as Pakistan’s prime minister, pledging to halt U.S. drone strikes and tackle an entrenched energy shortage as the nation struggles to arrest its economic slump.
Sharif, 63, returned to power more than 13 years after his second period as premier was cut short by a 1999 army coup. Winning almost half of the seats contested in a May 11 general election, his Pakistan Muslim League-N party will be able to govern without a major coalition partner.
“I will not make any promises; the economy is in terrible shape,” Sharif told parliament in Islamabad yesterday in an address carried on television. “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 3 percent 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 U.S. war in Afghanistan after the September 11, 2001 attacks.
“It will be very difficult for him because there are too many challenges including foreign policy and the civil-military relationship,” said Mutaher Ahmed Sheikh, professor international relations at the University of Karachi. “Everybody is saying drone attacks should be stopped, but this is only for public consumption.”
Sharif won yesterday’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, who was administered an oath by Zardari after the voting, 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. “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.
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 U.S. drone missile strike.
“Drone attacks should stop,” Sharif said in his speech. “We respect others’ sovereignty, but our sovereignty should be respected as well. This has to stop and we need to sit together and develop a consensus policy.”
In a May 23 speech, President Barack Obama said he would limit drone strikes and shift their responsibility to the military from the CIA, while retaining wide latitude to authorize such attacks against al-Qaeda targets and those who threaten U.S. and allied forces in and around Afghanistan.
Sharif’s “biggest challenge is to get the military establishment on his side to make bold decisions regarding peace with the Taliban,” said Mehdi Hasan, dean of the School of Communications at Lahore’s Beaconhouse National University, in an interview. Without that “you can’t attract foreign investment and see a sustainable improvement in the economy.”
The army in 2009 extended its offensives into the Taliban stronghold of South Waziristan. It has lost nearly 4,000 soldiers in fighting since and may be reluctant to support initiatives that buy the guerrillas time to rearm or assert their control over territory, according to Talat Masood, a retired army general and independent political analyst.
Sharif’s win kicks off a year of transition in Pakistan. Zardari is due to leave office in September, while General Ashfaq Pervez Kayani’s three-year extended term as army chief ends in November. Chief Justice Iftikhar Chaudhry will complete his term in December.
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 bloodless coup by General Pervez Musharraf, who went on to rule the country for most of the next decade.
Last month’s election 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.
Sharif, whose family owns steel and sugar mills, ended state monopolies in shipping, airlines and telecommunications during his two terms as prime minister in the 1990s.
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 percent of gross domestic product this year, wider than the government’s target of 4.7 percent, 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. “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 percent 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 adviser, 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.”
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