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ISLAMABAD, Aug 19 (Reuters) Leaders of Pakistan's coalition government today set about seeking a replacement for President Pervez Musharraf and tackling pressing economic and security problems.
Musharraf, former army chief and key ally of the United States in its campaign against terrorism, resigned yesterday to avoid impeachment nearly nine years after taking power in a coup.
Speculation he would resign had mounted since the fractious coalition government, led by the party of assassinated former prime minister Benazir Bhutto, said this month it planned to impeach him on charges of violating the constitution.
Prolonged wrangling over Musharraf's position hurt financial markets in the nuclear-armed country of 165 million people, and raised concern in Washington and elsewhere it distracted from efforts to tackle militants, especially in areas bordering Afghanistan.
Musharraf's resignation lifted Pakistan shares and the rupee yesterday and again today.
Stocks jumped more than 3 per cent in initial trade as investors cheered the easing of political turbulence while the rupee strengthened more than 2 percent against the dollar.
Investors said Musharraf's resignation removed a hurdle in politics, but markets were now waiting to see if the government could rule effectively.
''The market is now focusing on how well the coalition government can resolve the remaining issues,'' said Mohammed Sohail, a director of research at JS Global Capital. ''Now is a testing time for the coalition parties.'' Investors will be looking for concrete steps to restore confidence shattered by the political turmoil, analysts said.
These include shrinking the trade deficit by banning imports of non-essential items such as luxury consumer goods, and cutting government spending by abolishing all fuel subsidies, one said.
''NO DEAL'' Divisive questions still hang over Musharraf's fate. There was no announcement on Monday on whether he would get immunity from prosecution and be allowed to live freely in Pakistan.
Coalition officials had said Musharraf sought immunity, but he said in his resignation address he was asking for nothing.
One main coalition party, that of former prime minister Nawaz Sharif whom Musharraf ousted in 1999, has insisted he face trial for treason. Bhutto's party says parliament should decide.
Law Minister Farooq H Naek told reporters there had been no resignation deal with Musharraf.
''There is no deal. He resigned himself and as far as his accountability is concerned, coalition partners will decide,'' he said.
Naek said coalition leaders would also make a decision on the restoration of judges Musharraf purged last year.
The leaders were due to meet on Tuesday afternoon.
Sharif has been insisting the judges be restored but Bhutto's party has been more wavering, partly because, analysts say, the deposed chief justice might take up challenges to an amnesty from graft charges Musharraf granted party leaders last year.
With the coalition partners' preoccupation with Musharraf out of the way, the United States and other allies will be keen to see the government focus on security.
President George W. Bush said he appreciated Musharraf's efforts to fight al Qaeda and other extremists, and was committed to a strong Pakistan that strengthened democracy and fought terrorism.
Newspapers said coalition leaders must settle on a joint candidate for president and avoid squabbling over the post.
The chairman of the Senate, Mohammadmian Soomro, will be acting president until a new one is elected within 30 days.
Traditionally, Pakistan's president has been a figurehead, although under Musharraf the office was much more powerful.
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