Pakistan's economic czar Shaukat Aziz (search) was sworn in as prime minister Saturday and said his government's greatest challenge would be combatting terrorism and maintaining law and order.

Aziz also promised to modernize the armed forces, reorganize the law enforcement and judicial systems and tackle the endemic poverty and unemployment.

"Our biggest challenge is to improve peace and security in the country, especially the situation created by terrorism," he told lawmakers.

Aziz, 55, is a close ally of President Gen. Pervez Musharraf (search), whose support of the U.S.-led war on terrorism and military campaigns against al-Qaida militants along the Afghan border have stoked anger among Islamic militants.

Pakistan has been hit by a wave of terrorist attacks this year, and Aziz himself was targeted in an assassination attempt July 30 while campaigning. He was unhurt but nine others were killed.

Aziz was elected by parliament on Friday despite a boycott by the opposition, which condemned the process as undemocratic, claiming it was stage-managed by Musharraf, who still holds the levers of power. The president can dissolve parliament or fire the prime minister.

The new Cabinet was to be announced next week, and Aziz was expected to retain the finance ministry portfolio he's held since Musharraf took power in a bloodless 1999 coup.

Standing alongside Musharraf at the presidential palace, Aziz took the oath of office Saturday morning and later won a confidence vote 191-0 in the 342-seat National Assembly, or lower house, where pro-Musharraf lawmakers hold a majority.

The opposition abstained from both Friday's election for the premiership and the confidence vote because their candidate, Javed Hashmi (search), was barred from attending.

Hashmi is serving a 23-year jail term for attempting to instigate an army rebellion. His supporters claim his conviction in April was politically motivated — Hashmi was one of Musharraf's staunchest critics.

Aziz replaces Chaudhry Shujaat Hussain, who stepped down this week after only two months in the post. Hussain, leader of the ruling party, was the shortest-serving prime minister in Pakistan's 57-year history.

He stepped in as caretaker prime minister when Zafarullah Khan Jamali, who reportedly fell out with Musharraf, resigned in June. The move gave Aziz, Musharraf's favored candidate, time to win a seat in the National Assembly — a requisite for any prime minister.

Aziz said the peaceful transfer of power was "indication that our democracy is maturing in Pakistan. It's the start of a new era to build a strong and vibrant Pakistan."

Analysts credit Aziz with helping revive Pakistan's economy in recent years, but say that because of Musharraf's domination, the change in prime ministers is not expected to alter key policies — the alliance with Washington and peace talks with rival India, for example.

India's prime minister congratulated Aziz.

"It is my sincere hope that we can build upon recent positive developments and take forward the process of dialogue, in an atmosphere free from terrorism and violence," Manmohan Singh wrote in a letter to Aziz.

Aziz said national defense was his government's top priority, and that it would modernize the army, air force and navy.

Defense spending already accounts for about a fifth of the government budget.

Aziz promised "further expertise" for the country's nuclear program, saying it has "central status for the defense of our country."

The nuclear program, developed as a deterrent against India's military might, was tainted earlier this year after Pakistan's top scientist confessed to selling sensitive nuclear technology to Iran, Libya and North Korea with official permission.