Sharif sees decisive talks for Pakistan coalition

LAHORE, Pakistan Tue Aug 5, 2008 12:39am EDT

Nawaz Sharif, former prime minister of Pakistan, speaks during a news conference in Lahore August 4, 2008. REUTERS/Mohsin Raza

Nawaz Sharif, former prime minister of Pakistan, speaks during a news conference in Lahore August 4, 2008.

Credit: Reuters/Mohsin Raza

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LAHORE, Pakistan (Reuters) - Former Pakistani prime minister Nawaz Sharif said a meeting set for Tuesday with the head of the ruling party, Asif Ali Zardari, should be decisive for the future of their fractured four month-old coalition.

Sharif withdrew his party's ministers from Prime Minister Yousaf Raza Gilani's cabinet in May, after Zardari backtracked on a commitment to restore judges dismissed by President Pervez Musharraf last November during six weeks of emergency rule.

"Tomorrow's meeting, I think, should literally be an effective meeting ... I think it should also be decisive," Sharif told journalists in the eastern city of Lahore.

The two-time prime minister was due to meet Zardari, the widower of the late Benazir Bhutto, in Islamabad.

The outcome could determine the fate of Musharraf, who came to power as a general after overthrowing Sharif in a 1999 coup, and the chances of the new civilian government surviving a tortuous beginning.

Sharif wants wheels set in motion to impeach Musharraf but Zardari has so far warded off a confrontation with a president who neither the army nor the United States wants humiliated.

Sharif said he wrote to Zardari on July 16 asking him to immediately convene a parliamentary session to restore the deposed Supreme Court judges.

"I have also said that we should impeach the dictator who twice violated the constitution and committed high treason," he said. "If there is no progress then we will have to take some decision."

Gilani's government is faced with Islamist militancy across Pakistan's northwest, an economy at risk of meltdown, acute power shortages and higher fuel and food prices that have hit the poor majority among the Muslim nation's 160 million people.

To add to its problems, the United States has shown mistrust of Pakistan's main military intelligence agency, questioning whether it was involved in a suicide car bomb attack outside the Indian embassy in Kabul last month.

With so much uncertainty, Pakistan's main stock index dropped 3 percent on Monday to hit a near 23-month low, and stood 37 percent below where it started the year.

The rupee is touching all-time lows and the country's total foreign currency reserves barely cover three months of imports.

"Politics, both domestic and international, along with the macroeconomic scenario are now going to shape the future direction of the market," said Asad Iqbal, managing director at Ismail Iqbal Securities Ltd.

While U.S. ally Musharraf remains overwhelmingly unpopular after the defeat of his allies in a February elections, many people are rapidly losing faith in the new civilian leaders to pull the country round.

(Writing by Augustine Anthony; editing by Simon Cameron-Moore)