June 20 (Bloomberg) -- Pakistani lawmakers will elect a new prime minister this week as Yousuf Raza Gilani became the nation’s first premier to be ousted from his position after a ruling by the Supreme Court.

Gilani and his federal ministers were removed from office after the court ruled the former premier ineligible because of a contempt conviction, Siraj Ahmed, an official at the cabinet division, said by phone from Islamabad today. A session of the parliament has been summoned on June 22 at 5:30 p.m. local time to elect a new prime minister, state-run Pakistan Television reported.

With months to go before the next general elections scheduled to be held by early next year, Gilani’s departure marks the climax of a four-year clash between the government and the judiciary over corruption charges. The administration, aiming to be the first elected Pakistani government to serve a full five-year term, is struggling to revive an economy hurt by a record energy crisis and mend ties with the U.S. that are critical to stabilizing Afghanistan.

“We will see political uncertainty and confusion for a couple of weeks,” said Hasan-Askari Rizvi, an independent political and military analyst in the eastern city of Lahore. “The tension will persist and intensify before we have elections.”

The Karachi Stock Exchange 100 Index, which has climbed 20.5 percent this year, fell 0.2 percent to 13,650.19 as of 2:30 p.m. local time. Pakistan’s rupee fell as much as 0.7 percent against the U.S. dollar, the first decline in four days.

Corruption Charges

Gilani, 60, who was censured by the court over failure to pursue corruption charges against President Asif Ali Zardari, was disqualified retroactive to April 26, 2012, according to an e-mailed statement from the Election Commission of Pakistan yesterday. The statement followed a court ruling that ordered the agency to disqualify Gilani from his position as member of the National Assembly.

“Investors are cautious but things can go really bad going forward,” said Yasir Qadri, who oversees the equivalent of $478 million in stocks and bonds as chief executive officer at Arif Habib Investments Ltd. in Karachi. “If the court continues to insist that the new prime minister should reopen corruption cases it can be the worst case for the market.”

A member of the ruling Pakistan People’s Party, Gilani was appointed as Pakistan’s 25th prime minister in April 2008 and had vowed to complete his term, saying only the speaker of parliament has the power to remove him. Assembly speaker and Zardari ally Fehmida Mirza ruled last month Gilani was free to remain as premier, prompting petitions to the court to disqualify him.

The PPP-led coalition has the parliamentary majority it would need to elect a new prime minister. The selection of the candidate will be made by Zardari, Pakistan Television reported, citing Khursheed Shah, senior party leader.

Shah, a former minister, Makhdoom Shahabuddin, former textile minister, and Chaudhry Ahmed Mukhtar, former water and power minister, are the candidates being considered for the top post, GEO television reported, without saying where it got the information.

Senior Judges

Pakistan’s most senior judges convicted Gilani of contempt of court on April 26 for failing to act on an earlier order to pursue corruption investigations against Zardari in Swiss courts. Gilani’s lawyers failed to convince judges that the constitution grants the president immunity from prosecution while in office.

“Writing a letter to Swiss authorities will be just like stabbing my president in the back,” Gilani told supporters at a political rally in March. “I would prefer going to jail rather than violating the constitution.”

Negotiating with political parties to stay on as a civilian president, former military ruler Pervez Musharraf in 2007 decreed an amnesty to halt corruption probes against 8,000 politicians and officials, including Zardari and his wife, slain former Prime Minister Benazir Bhutto.

The Supreme Court in 2009 ordered the government to formally ask Swiss authorities to revive cases there against Zardari and Bhutto, who was assassinated at a political rally.

Political Career

Gilani, a native of Multan in the Punjab province, began his political career in the 1980s, when then military ruler General Muhammad Zia-ul-Haq appointed him to a powerless advisory council set up after parliament was dissolved. He joined the PPP after Zia died in a plane crash in 1988 and Bhutto was elected prime minister.

During Bhutto’s second term as prime minister, from 1993 to 1996, Gilani served as speaker of the National Assembly. He spent five years in jail under Musharraf for allegedly corrupt hiring practices in the assembly’s secretariat during his term running proceedings.

The extended legal and political turmoil may further distract the ruling coalition as it seeks to lift a $200 billion economy hit by power shortages and a rising budget shortfall. Thousands of Pakistanis attacked government buildings and set fire to public property across the Punjab province this week as part of protests against prolonged electricity outages.

Pakistan’s economic growth sank to 2.4 percent in the last fiscal year, one of the lowest expansions in the past decade, as militant attacks, record monsoon floods and the nation’s worst energy crisis deterred investment. The government cut its growth forecast for the year that ends in June to 3.7 percent.

--With assistance from Farhan Sharif in Karachi. Editors: Naween A. Mangi, David Merritt