By Michael Georgy and John Chalmers
ISLAMABAD (Reuters) - Toppled in a 1999 coup, jailed and exiled, Nawaz Sharif has made a triumphant election comeback and on Sunday was heading for a third term as Pakistan's prime minister.
The polls were a landmark, marking the first time one elected government was to replace another in a country vulnerable to military takeovers.
But Saturday's vote failed to realize the hopes of many that dynastic politics would end after years of misrule and corruption in the strategic U.S. ally.
Sharif, 63, a wealthy steel magnate from the pivotal Punjab province, held off a challenge from former cricket star Imran Khan who had hoped to break decades of dominance by Sharif's Pakistan Muslim League (PML-N) and the Pakistan People's Party (PPP), led by the Bhutto family.
Khan's Tehrik-i-Insaf (PTI) put up a strong fight and he is likely to remain a force in politics.
"Nawaz's victory says two things about Pakistan: one, the people of Pakistan prefer the comfort of status quo over the uncertainty of revolutions; and two, all roads to the center go through Punjab, and in Punjab, people are right-leaning and conservative," said senior journalist Nusrat Javeed.
"Still, for a party that only really arrived on the political scene in a serious way two years ago, PTI's performance was remarkable, to say the least."
Sharif declared victory in a jubilant speech to supporters. On Sunday, television channels said results so far showed that the PML-N had captured 84 seats of the 272 National Assembly seats that were contested.
The PTI had secured 19 seats while the PPP, which led the government for the past five years, won 11.
Sharif, a religious conservative, has said the army, which has ruled the country for more than half of its turbulent history, should stay out of politics.
But he will have to work with Pakistan's generals, who set foreign and security policy and manage the nuclear-armed country's difficult relationship with the United States as NATO troops withdraw from neighboring Afghanistan in 2014.
Sharif also believes Pakistan should reconsider its support for the U.S. war on Islamist militancy, which has earned the country billions of dollars in aid.
Despite pre-poll violence and attacks on Saturday that killed at least 17 people, millions turned out to vote.
Sharif's party may not have enough seats to rule on its own and may be forced into a coalition, which could make it difficult to push reforms needed to revive the economy.
Sharif, who advocates free-market economics, is likely to pursue privatization and deregulation to revive flagging growth. He has said Pakistan should stand on its own two feet but may need to seek a another bailout from the International Monetary Fund to avoid a balance of payments crisis.
Sharif will have to ease widespread discontent over endemic corruption, chronic power cuts and crumbling infrastructure. He has described Pakistan as a "mess".
Cricketing hero Khan in the end did not have the momentum needed to trip up Sharif despite his popularity among urban youths, many of whom were voting for the first time in an election that saw a robust turnout of 60 percent.
They had rallied behind Khan's calls for an end to graft and a halt to U.S. drone strikes against suspected militants on Pakistani soil, widely seen as a violation of sovereignty.
BLOODY ELECTION DAY
A string of bomb blasts marred election day, with one attack on a party office in the southern city of Karachi killing 11 people and wounding about 40.
Pakistan's Taliban, who are close to al Qaeda, have killed more than 125 people in election-related violence since April. The group, which is fighting to topple the government, regards the poll as un-Islamic.
Despite Pakistan's history of coups, the army stayed out of politics during the five years of the last government and threw its support behind Saturday's election.
However, some fear the military could step back in if there were a repeat of the incompetence and corruption that frustrated many Pakistanis during the last government.
Sharif, who was toppled in a 1999 bloodless coup by former army chief Pervez Musharraf, may take steps to improve ties with Pakistan's arch-enemy, India. Efforts to boost trade between the neighbors have stalled due to suspicion on both sides.
If Sharif is forced into a coalition, he may look to Islamist parties to cobble together a majority in parliament.
On top of the 272 contested seats, a further 70 - most reserved for women and members of non-Muslim minorities - are allocated to parties on the basis of their performance in the constituencies. To have a majority of the total of 342, the government would need 172 seats.
(Additional reporting by Mehreen Zahra-Malik and Katharine Houreld in ISLAMABAD, Gul Yousafzai in QUETTA, Mubasher Bukhari in LAHORE and Jibran Ahmed in PESHAWAR; Editing by Nick Macfie)
