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Politics

Picking up the pieces

NEW DELHI -- Nawaz Sharif, 64, who became prime minister of Pakistan for the third time in June, will try to finish two big jobs with both hands tied behind his back: rebuilding an ailing economy and improving a deteriorating security situation.

     Those metaphorical shackles? Pakistan's serious shortage of foreign exchange reserves and a chronic budget deficit.

     Sharif, a former businessman who as prime minister in the 1990s implemented economic reforms, won wide support from the nation's business community in the general election, held in May. After assuming office, the prime minister immediately launched negotiations with the International Monetary Fund and succeeded in securing a total of $6.6 billion in loans over the next three years.

     The IMF had stopped extending loans to Pakistan in 2011, and there had been growing concerns that the country might default on its debt amid a widening current-account deficit.

Economics 101: army relations

It is also necessary for Sharif to build and maintain a stable relationship with the politically powerful army, often called "a state within the state," if he wants to focus on restructuring Pakistan's economy. Ashfaq Parvez Kayani, who had served as chief of staff of the Pakistani Army for six years, left the post in November. Sharif appointed Raheel Sharif as Kayani's successor. The prime minister has a close personal relationship with Raheel Sharif, who is widely seen as a moderate. The appointment is expected to help bolster civilian control of the Pakistani military.

     Nawaz Sharif faces a major challenge in improving Pakistan's security situation. Although he has been calling for dialogue with Tehrik-e Taliban Pakistan, an alliance of militant groups, the killing of Hakimullah Mehsud, the alliance's supreme commander, in a recent American drone attack, has scuttled any chance of success. Tehrik-e Taliban Pakistan, in fact, has since vowed to step up terrorist attacks on its enemies, including the prime minister and senior government officials.

The Afghanistan card

When U.S. forces leave Afghanistan at the end of this year, Pakistan's neighbor might re-emerge as a breeding ground for terrorism. The U.S. will certainly step up its drone assassinations along Pakistan's border with Afghanistan before the scheduled pullout. Meanwhile, Washington has decided to resume its military aid to Pakistan.

     While campaigning for the election, Nawaz Sharif called for reconciliation with the Pakistani Taliban alliance and a halt to U.S. drone attacks. He would run a considerable political risk were he to remain silent about, or defend, the assassinations. In Pakistan, anti-American sentiment runs deep.

The India thaw

On another front, there are growing signs of a thaw in Pakistan's tense relations with India. Both neighbors are nuclear-armed and consider each other the archenemy. Shahbaz Sharif, chief minister of Punjab, Pakistan, in December visited India and met with Prime Minister Manmohan Singh.

     During the meeting, Shahbaz Sharif, who is Nawaz Sharif's brother and the second-most-powerful politician in Pakistan's ruling party, expressed a wish to improve the relationship. The two countries should resume dialogue with an eye toward building friendlier ties, he said.

     This suggests that Nawaz Sharif intends to temporarily shelve Pakistan's territorial dispute with India over Kashmir to bolster bilateral trade. To this end, he appears ready to grant India most-favored-nation status.

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