Sharif Readies for Third Turn at Pakistan Helm With Energy Focus
Nawaz Sharif is set to be sworn in as Pakistan’s prime minister for a record third term today as the nuclear-armed nation struggles to reverse an economic slump and defeat a decade-old insurgency.
Sharif, 63, will return 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, Sharif’s Pakistan Muslim League-N party will be able to govern without a major coalition partner.
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 a record energy shortage shuts the grid for as long 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 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, which does research and advocacy on public policy. “To fix the economic crisis, certain tough decisions will have to be made. Riding a popular wave, it is highly unlikely that Sharif would annoy the electorate, especially his support base comprising the business class.”
Sharif is poised to win today’s vote for prime minister in the 342-member lower house of parliament, with his nominee for speaker, Sardar Ayaz Sadiq, securing 258 of the 313 votes cast by lawmakers on June 3. President Asif Ali Zardari’s Pakistan Peoples Party, which has 39 members in the house, plans to put up a candidate for prime minister, as does the party of former cricket star Imran Khan, which means there will be a procedural ballot.
Sharif’s speech today to parliament will focus on Pakistan’s chronic energy shortages that have shut hundreds of factories and led to nationwide riots.
“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 in a phone interview 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.
The former premier said on May 27 that ending the power outages, which the Planning Commission estimates sliced 2 percentage points off growth in the year to June 2012, is his first priority.
His party’s election manifesto outlines plans to rid the power sector of some of its debt, switch from oil to coal-fired plants, cut losses from power theft and add 10,000 megawatts of new capacity by encouraging $20 billion in investment in the next five years.
Sharif may also have to negotiate a bailout with the International Monetary Fund after foreign exchange reserves plunged 40 percent from a year ago, to less than two months of imports, according to central bank data.
“We are in a dilemma,” Sharif told supporters on May 27 in a speech broadcast by television channels. “Should we pay off our debt, or spare money to fix the electricity crisis? The situation is very critical. There are no quick fixes to these problems.”
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.
Sharif’s “biggest challenge is to get the military establishment on his side to make bold decisions regarding peace with the Taliban, and improve ties with India,” 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 spoke to Indian Prime Minister Manmohan Singh after his election victory and vowed to improve ties. While the two neighbors have eased restrictions on commerce and restored talks suspended after the 2008 attack on Mumbai, their rivalry fuels insecurity on the subcontinent.
Sharif’s election win kicks off a year of transition in Pakistan’s top offices. Zardari is scheduled 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.
The South Asian nation 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 IMF said in January.
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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