The controversial front-runner swept a poll among lawmakers to become the 14th president of the world's only nuclear-armed Islamic state and front-line 'war on terror' ally, even as a terrorist bombing killed at least 16 people in the north-west.

The election was called after the deeply unpopular Pervez Musharraf resigned last month rather than risk being impeached.

The two daughters of Mr Zardari and Ms Bhutto - Bakhtawar and Aseefa - hugged friends in delight at the national assembly as the results became clear.

'My victory is the people's victory and the victory of democracy,' Mr Zardari told state-run Pakistan Television, which announced the results.

The 53-year-old co-head of the governing Pakistan Peoples Party (PPP) secured 481 votes out of 702, far more than the 352 votes that would have guaranteed him victory.

His two rivals - retired chief justice Saeeduzzaman Siddiqui, who was backed by former premier Nawaz Sharif, and Mr Mushahid Hussain, a close aide of Mr Musharraf - trailed far behind.

Now, however, Mr Zardari faces a far tougher task.

His predecessor's nearly nine-year rule was marked by Islamic militancy and economic turmoil, and doubts remain whether any leader can do much to change that.

Nearly 1,200 people have been killed in bombings and suicide attacks across Pakistan in the past year, in unrest seen as a backlash by militants angry at Mr Musharraf's support for the United States.

Underscoring the problems the new president faces, a suicide car bomber yesterday killed 16 people in an attack on a police post in Peshawar. At least five of the dead were policemen, and the blast wounded about 40 people. Pakistani Taleban claimed responsibility.

Mr Zardari himself had already moved to a safe haven in fear of attempts being made on his life. His wife, Ms Bhutto, was killed in a gun-and-suicide attack at a campaign rally in December last year.

Furthermore, Pakistan's economy is backsliding. Inflation is rampant, and a volatile political situation is contributing to a 40 per cent fall in the stock market since January, in a country already reliant on foreign aid.

Investors hope the election will bring some stability, but Mr Zardari, once dubbed 'Mr Ten Per Cent', has spent 11 years in jail on charges ranging from corruption to murder. An amnesty signed by Mr Musharraf cleared him of all corruption charges last year.

Confidants say Mr Zardari is expected to press ahead with some elements of a 'grand masterplan' developed by Ms Bhutto that fell apart with her assassination, the BBC reported.

These include a deal that will ensure the country's most powerful institution - the army - a steady supply of aid and equipment from the US. In return, the army will go all out to defeat militants in Pakistan's tribal areas and keep out of national politics, party insiders say.

'If he can maintain this position and ensure the plan is carried out, Bibi (Ms Bhutto) will have won even in death,' the BBC quoted a PPP insider as saying.

Mr Zardari, however, also faces a longer-term, all-out battle with Mr Sharif, the most popular politician in the country, that many analysts believe may eventually wipe out the PPP, said the BBC.

For now, however, Mr Sharif's Pakistan Muslim League-Nawaz party accepted defeat, saying it hoped Mr Zardari would be 'apolitical' as head of state.

AFP, Reuters, AP