Inside Financial Markets

Pakistani Leader Nawaz Sharif Nears Pact With Military : WSJ

Nawaz-Sharif5Pakistani Leader Nawaz Sharif Nears Pact With Military : WSJ

ISLAMABAD–The Pakistani military is close to an agreement with the government in which the prime minister would relinquish control of security affairs and strategic foreign policy, government officials said, amid antigovernment protests that have paralyzed the capital.

A nearly two-week confrontation between the administration and demonstrators, which the government believes are backed by the military, has put Prime Minister Nawaz Sharif under pressure.

Government aides said the military has seized on Mr. Sharif’s weakened status during the political crisis to strike a deal in which he would leave strategic policy areas–including relations with the U.S., Afghanistan and India–to be controlled by the armed forces.

The military is now seeking guarantees from the prime minister that he will follow through on the agreement, the aides said. Spokesmen for the prime minister and several government ministries didn’t return calls seeking comment. A Pakistani military spokesman didn’t respond to requests to comment.

Since winning an outright majority in Parliament 16 months ago, Mr. Sharif has angered the military establishment with efforts to assert civilian control of the armed forces and decide on policies that were traditionally the domain of the military. The deal with the military would sharply curtail Mr. Sharif’s powers, and cast doubt on his ability to make peace with Pakistan’s rival, India, a top priority for the prime minister.

“If Nawaz Sharif survives, for the rest of his term, he will be a ceremonial prime minister–the world will not take him seriously,” said Ayesha Siddiqa, an analyst based in Islamabad. “A soft coup has already taken place. The question is whether it will harden.”

Thousands of protesters arrived on Aug. 15 in Islamabad, led by Imran Khan, a politician and former cricket star, and Muslim cleric Tahir ul Qadri, demanding the prime minister’s resignation. The activists have slept on the streets of the capital since, protesters moving last week in front of the Parliament.

The armed forces have run Pakistan for half its 67-year history, including a 1999 coup led by then-army chief Pervez Musharraf, which ended Mr. Sharif’s last stint as prime minister. Even when not formally in power, the military has traditionally run foreign and internal security policies.

Government aides said the military has extracted a promise of freedom for Mr. Musharraf, who is being prosecuted by Mr. Sharif’s government for treason. That charge, related to Mr. Musharraf’s military rule following the 1999 coup, is another major source of tension between the administration and the armed forces. Mr. Musharraf denies the treason charge.

According to political and security officials, Mr. Sharif’s government had secretly agreed to let Mr. Musharraf go abroad after a symbolic indictment over treason, which took place in March, but the government went back on the deal. That eroded trust between the military and Mr. Sharif.

Government aides said the administration was also willing to let the prime minister’s brother, Shahbaz Sharif, step down as chief minister of Punjab province, the country’s most heavily populated region.

Democracy was restored in Pakistan in 2008, when a government led by Asif Zardari of the Pakistan Peoples Party was elected and ruled until last year’s elections. Mr. Zardari’s government, a weak coalition, had also in its early days tried to push its own foreign and security policies, but it was soon beaten back.

“Nawaz Sharif thought that he was no Asif Zardari,” said Murtaza Solangi, an analyst who had served as head of Radio Pakistan, the state broadcaster, under the Zardari government. “But the military decided that they’ll make him an Asif Zardari.”

Mr. Sharif’s election victory had also raised hopes of a shift in policy toward Afghanistan and India. Mr. Sharif offered India a trade liberalization deal, and pledged to Kabul that he would end Pakistan’s interference in Afghanistan.

But Mr. Sharif’s stated aim of making peace with India and the pace at which he started to pursue this goal–seen in Washington as a historic opportunity–riled the military establishment. Mr. Sharif’s policy of holding extended peace talks with Pakistani Taliban militants held up the army’s plans for an operation against them, sowing further misgivings about the government.

A government aide said that the personal political ambitions of the protest leaders had been encouraged by a military that wanted to “cut Nawaz Sharif down to size.”

“The script was never to topple the government but weaken it to the point where it was just left hanging, unable to move,” said the aide.

Mr. Khan has called for a government of technocrats to be brought in now, but denied that he is acting on behalf of the military.

“I’m doing this for Pakistan, not for myself,” Mr. Khan told supporters in a speech Wednesday. “To save our democracy, I’m not going from here without Nawaz Sharif’s resignation.”

Washington last week issued a statement of support for the administration, saying: “We support the constitutional and electoral process in Pakistan, which produced the Prime Minister of Nawaz Sharif.”


Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

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