Pervez Musharraf, 65, came to power in a 1999 coup and has anchored nuclear-armed Pakistan's alliance with the United States, especially since Pakistan signed up for the U.S.-led campaign against terrorism after the 9/11 attacks.
He promoted an investor-friendly environment and oversaw good growth and surging stocks until this year.
Following are some of the political, economic and diplomatic implications of his expected resignation.
* Opposition to Musharraf has bonded rival parties in the coalition government. His departure could see them drift apart.
* The Pakistan People's Party of assassinated former prime minister Benazir Bhutto leads the coalition, with former prime minister Nawaz Sharif's Pakistan Muslim League (Nawaz) its main partner. The two main civilian parties are old rivals and despite recent cooperation, will compete in the next election.
* The coalition government has vowed full commitment to the campaign against violent militancy. Despite questions over its policy of trying to negotiate with militants, recent operations in the northwest should have reassured Washington and other allies the government will match Musharraf's security efforts.
* The military plays a dominant role in security policy, and its cooperation with the new government has been smooth.
* The United States, apparently resigned to Musharraf's exit, says Pakistan's leadership is a Pakistani matter. Ties between the new government and Washington are good and should remain so as long as the latter is satisfied the government is doing enough to stop militancy, in particular attacks into Afghanistan.
* The new government is committed to the peace process with India launched under Musharraf in 2004.
* The government has vowed to turn its attention to economic problems after Musharraf leaves. Inflation is at its highest in years, and trade and fiscal deficits are widening. High oil prices have depleted foreign reserves while the rupee has lost about a quarter of its value this year. An end to the uncertainty over Musharraf should ease investor worry. Stocks rose 4 percent on Monday as investors cheered his departure as a milestone toward easing tension.
THE NEXT PRESIDENT
* Who becomes next president could depend on the powers the position retains. Musharraf has authority to dismiss parliament and make top military and judicial appointments. Coalition partners vow to strip the presidency of those powers and make it a largely ceremonial post. However, analysts say Bhutto's widower, Asif Ali Zardari, might want the job, in which case he will want to keep the powers. Zardari has also suggested the next president might be a woman. Newspapers have speculated an ethnic Pashtun leader, Asfandayr Wali Khan, whose liberal party is part of the coalition, might get the job. The president is elected by the four provincial assemblies and the national parliament.