9. Third democratic era (1988–1999): Benazir–Nawaz period

Democracy returned again in 1988 after the general elections which were held after the death of President General Zia-ul-Haq. The elections marked the return of Peoples Party back into the power whose leader, Benazir Bhutto, became the first female Prime minister of Pakistan as well as the first female head of government in a Muslim-majority country. This period, lasting until 1999, introduced the parliamentary system and competitive two-party democracy in the country, featuring a fierce competition between centre-right conservatives led by Nawaz Sharif and centre-left socialists directed by Benazir Bhutto. The far-left politics and the far-right politics had disintegrated from the political arena with the fall of global communism and the United States lessening its interests in Pakistan. It was during the 1990s when various bands released their highly acclaimed and commercially successful albums which it led to the boom of rock music in Pakistan's music industry. Following the success of Vital Signs and other bands, the rock music bands enormous popularity and success significantly opened a new wave of rock music and opened a modern chapter in the history of Pakistan, bringing the significant shift of country's conservative transformation into semi-Western modernism during the 1990s.

“ The Pressler amendment was a veto in the hands of India— a tool and a club in the hands of those who stood against America and with the Soviet Union for fifty years ... The United States "ethically" should honour its "contractual obligation" to Pakistan, legally and morally ... ”

— Prime minister Benazir Bhutto, 1995,

Benazir Bhutto presided over the country during the penultimate times of Cold war, and cemented pro-Western policies due to common distrust of communism. Her government oversaw the successful troop evacuation of Soviet Union from neighboring Communist Afghanistan. Soon after the evacuation, the alliance with U.S. came to end when the secret of a successful clandestine atomic bomb project was revealed to world which led to imposition of economic sanctions by the United States. In 1989, she ordered a military intervention in Afghanistan that brutally failed, leading her to depose the directors of the intelligence services. With offing American aid to the country, she hastily imposed the 7th Plan to restore the national economy while centralizing the economy. Nonetheless, the economic situation worsened when the state currency of Pakistan lost the currency war with India. The country significantly entered in era of stagflation during this period, and her government was soon dismissed by the conservative President Ghulam Ishaq Khan.

The 1990 General elections allowed the right-wing conservative alliance, the Islamic Democratic Alliance (IDA) led by Nawaz Sharif, to form the government under a democratic system for the first time in history. Attempts to end the stagflation, Sharif launched the privatization and economic liberalisation while on the other hand, adopted a policy of ambiguity on atomic bomb programs. Sharif intervened in Gulf War in 1991, and ordered an operation against the liberal forces in Karachi in 1992. Institutional problems arose with president Ghulam Khan, whose attempt was to dismiss Sharif on the same charges as he had pressed on Benazir Bhutto. Through the Supreme Court judgement, Sharif was restored and together with Benazir Bhutto ousted President Ishaq Khan from the presidency. Later in weeks, Sharif was forced to relinquish office by the military leadership.

During the general elections, Benazir Bhutto secured the plurality and formed the government after appointing a hand-picked president for the presidential office and a new cabinet. Approving the appointments of all four-star chiefs of navy, air force, army and chairman joint chiefs, the internal policies were exercised on tough stance to bring political stability in the country; her tough rhetoric her a nickname "Iron Lady" by her rivals. Proponents of social democracy and national pride were supported at an extreme level while the nationalization and centralization of economy continued after the 8th Plan was enacted to end the historical era of stagflation. Her foreign policy made an efforts to balance the relations with the Iran, United States, Western world, and socialist states.

Relations with India and Afghanistan worsened in 1995 when allegations were leveled of Pakistan and other countries providing economic and military aid to the group from 1994 as a part of supporting the anti-Soviet alliance. Pakistan was one of three countries which recognized the Taliban government and Mullah Mohammed Omar as the legitimate ruler of Afghanistan. Benazir Bhutto continued her pressure on India, pushing India on to take defensive positions on its nuclear programme. Benazir Bhutto clandestine initiatives modernized and expanded the atomic bomb programme after launching the missile system programs. In 1994, she successfully approached the France for the technology transfer of AIP technology to the country. Focusing on culture development, her policies resulted in shaping the rock and pop music industry in the country, and film industry made its notable comeback after introducing new talent to the public. She exercised tough policies to banned the Indian media in the country, while promoting television industry to produce dramas, films, artist programs, and music, extremely devoting to the country. The grievousness and public angst about the weaknesses of Pakistan education led to large-scale federal support for science education and research in the country by both Benazir and Nawaz Sharif to meet with the competition with India.

Despite her tough policies, the popularity of Benazir Bhutto waned after her husband became allegedly involved in the controversial death of Murtaza Bhutto. Many public figures and officials suspected even Benazir Bhutto's involvement in the murder, although there were no proves. In 1996, seven weeks passed this incident, Benazir Bhutto's government was dismissed by her own hand-picked president on charges of Murtaza Bhutto's death.

The 1997 election resulted in conservatives receiving a heavy majority of the vote, obtaining enough seats in parliament to change the constitution, which Prime minister Sharif amended to eliminate the formal checks and balances that restrained the Prime Minister's power. Institutional challenges to his authority - led by the civilian President Farooq Leghari, chairman joint chiefs general Jehangir Karamat, chief of naval staff admiral Fasih Bokharie, and Chief Justice Sajjad Ali Shah - were put down and all four were forced to resign; Chief Justice Shah doing so after the Supreme Court was stormed by Sharif partisans.

Problems with India further escalated in 1998, when the television media reported the Indian nuclear explosions, codename Operation Shakti. When news flooded in Pakistan, a shocked Sharif called for a national security meeting in Islamabad and vowed that "she (Pakistan) would give a suitable reply to the Indians ...". After reviewing the effects of tests for roughly two weeks, Sharif ordered PAEC to perform a series of nuclear tests at the remote area of Chagai Hills in 1998 itself. The military forces in the country were mobilize at a war-situation level on Indian border.

“Today, we have settled a score and have carried out six successful nuclear tests"”

— Prime minister Nawaz Sharif announcing the tests on May 30, 1998

Internationally condemned, but extremely popular at home, Sharif took steps to control the economy and mobilized all the defence assets of Pakistan by closed all airspace routes by giving red-alerts orders to PAF and Pakistan Navy. Sharif responded fiercely, and defused the international pressure by targeting India for global nuclear proliferation while gave great criticism to the United States for atomic bombings on Japanese cities of Atomic bombings of Hiroshima and Nagasaki:

If [Pakistan] had wanted, she would have conducted nuclear tests 15–20 years ago ... but the abject poverty of the people of the region dissuaded ... [Pakistan] from doing so. But the [w]orld, instead of putting pressure on (India) ... not to take the destructive road ... imposed all kinds of sanctions on [Pakistan] for no fault of her.....! If (fellow) Japan had its own nuclear capability.. (cities of) ... Hiroshima and Nagasaki would not have suffered atomic destruction at the hands of the ... United States ...

Nawaz Sharif—Prime minister, on 30 May 1998, televised at PTV, 

Under Nawaz Sharif's leadership, Pakistan became the seventh nuclear power country, the first country in the Muslim world, as well as a declared nuclear-weapon state. The conservative government also adopted environmental policies after establishing the environmental protection agency. Sharif too continue Bhutto's cultural policies, though he did allowed Indian channels to be viewed in the country. The next year, Kargil war by Pakistan-backed Kashmiri militants threatened to escalate to a full-scale war and increased fears of a nuclear war in South Asia. Internationally condemned, the Kargil war was followed by Atlantique Incident which came on a bad juncture for the Prime minister Sharif who no longer a hold the public support for his government.

On 12 October 1999, Prime minister Sharif's daring attempt to dismiss General Pervez Musharraf from the posts of chairman joint chiefs and chief of army staff failed after the military leadership refused to accept the appointment of ISI director Lieutenant-General Ziauddin Butt as chairman and army chief.[168] General Musharraf returning to Pakistan from a PIA commercial airliner, Sharif ordered the Jinnah Terminal to be sealed to prevent the landing of the PIA flight, which then circled the skies over Karachi for several hours. A counter coup d'état was initiated, the senior commanders of the military leadership ousted Sharif's government and took over the airport; the flight landed with only a few minutes of fuel to spare. The Military Police seized the Prime Minister's Secretariat and deposed Sharif, Ziauddin Butt and the cabinet staffers who took part in this assumed conspiracy, shifting placed him in infamous Adiala Jail. A quick trial was set in Supreme Court which gave Sharif a life sentence, with his assets being frozen based on a corruption scandal, and he was near receiving the death sentence based on the hijacking case.