FACTBOX: Implications of Musharraf's resignation

(Reuters) - Leaders of nuclear-armed Pakistan's coalition government set about on Tuesday seeking a replacement for President Pervez Musharraf and tackling pressing economic and security problems.

Pakistan's beleaguered Musharraf announced his resignation on Monday. Musharraf, 65, came to power in a 1999 coup and anchored Pakistan's alliance with the United States and promoted an investor-friendly environment which produced good growth and surging stocks until this year.

Following are some of the political, economic and diplomatic implications of his resignation.

INTERNAL POLITICS

* Opposition to Musharraf has bonded rival parties in the coalition government. His departure could see them drift apart.

* The Pakistan People's Party of assassinated former prime minister Benazir Bhutto leads the coalition, with former prime minister Nawaz Sharif's Pakistan Muslim League (Nawaz) its chief partner. The two main civilian parties are old rivals and despite recent cooperation, will compete in the next election.

* One main issue on which they have been unable to agree is whether to restore judges purged by Musharraf last year.

SECURITY

* The coalition government has vowed full commitment to the campaign against violent militancy. Despite questions over its policy of trying to negotiate with militants, recent operations in the northwest should have reassured Washington and other allies the government will match Musharraf's security efforts.

* The military plays a dominant role in security policy, and its cooperation with the new government has been smooth.

FOREIGN RELATIONS

* The United States, despite its close friendship with Musharraf, said Pakistan's leadership was a Pakistani matter. Since Musharraf's resignation U.S. President George W. Bush has said he looks forward to working with Pakistan on the economic, political and security challenges it faces. Washington can be expected to press the coalition government to take a firm line to stop militancy, in particular attacks into Afghanistan.

* India enjoyed some of its best diplomatic relations with Pakistan in decades under Musharraf. While the new government is committed to the peace process with India, launched under Musharraf in 2004, India's fear is that a weak civilian government in Islamabad will not have the same muscle Musharraf had over the army and the powerful military spy agency, which India suspects has a hand in most attacks on its soil.

ECONOMY

* The government has vowed to turn its attention to economic problems after Musharraf leaves. Inflation is at its highest in years, and trade and fiscal deficits are widening. High oil prices have depleted foreign reserves while the rupee has lost about a quarter of its value this year.

* An end to the uncertainty over Musharraf eased investor worries and the main stock index and rupee gained on both Monday and Tuesday. However, the markets were off early highs on Tuesday and some economists expressed doubts about the new government's ability to deal with the economic challenges the country faces.