ISLAMABAD, PAKISTAN — The Pakistani government’s reversal of a controversial economic measure won back the support of the second-largest party in its coalition Friday and staved off a possible collapse, but it also increased tensions with the United States and other international donors.
The Muttahida Qaumi Movement’s return, which restored the ruling coalition’s parliamentary majority, came a day after Prime Minister Yousaf Raza Gillani announced that the government would capitulate to the party’s key demand by canceling a recent increase in fuel prices. That decision drew stern criticism from U.S. Secretary of State Hillary Rodham Clinton.
While the MQM’s move resolved the latest political crisis to rock the volatile, U.S.-backed nation, it also highlighted how beholden President Asif Ali Zardari’s ruling Pakistan People’s Party is to its coalition partners. Gillani said the government would also drop a proposal for an expanded sales tax that it had promised to the International Monetary Fund and that the United States had also encouraged. That proposal, too, was opposed by the MQM and opposition parties.
Clinton called the fuel price reversal a mistake that would damage Pakistan’s efforts to shore up its anemic economy. U.S. officials fear further destabilization in a country battling risingIslamist extremism and a powerful Taliban insurgency.
The MQM, which is dominant in the southern metropolis of Karachi,pulled out of the coalition on Sunday, several days after a similar defection by a smaller religious party.
“We believe that the government of Pakistan must reform its economic laws and regulations, including those that affect fuel and its cost,” Clinton told reporters in Washington late Thursday. “We think it is a mistake to reverse the progress that was being made.”
On Friday, the MQM said it welcomed the government’s decisions, with Raza Haroon, a senior MQM leader, declaring that the reunited coalition would “steer the country out of this storm.” However, the party said it wanted to see other changes, including an end to government corruption, before its two federal ministers would return to the cabinet.
Other parties, including the main opposition party, the Pakistan Muslim League-N, had echoed the demand for a rollback of the fuel price increase. On Tuesday, it gave the government six days to accept several stipulations or risk a no-confidence vote in parliament. That could have led to Gillani’s ouster or early elections.
Political turmoil reached new heights the same day with the assassination of a prominent ruling party figure, the liberal governor of Punjab province, Salman Taseer, who had served as a counterweight to opposition dominance in the nation’s most populous province. Taseer was killed by one of his police guards, who allegedly disagreed with the governor’s outspoken criticism of Pakistan’s ban on blasphemy.
Faced with a rising fiscal deficit, Pakistan has promised economic restructuring, including a widened sales tax, to the IMF, which wants to see the changes before releasing the last tranche of an $11 billion emergency loan. But the MQM, which says higher fuel prices and sales taxes will harm its urban base, has called instead for tax hikes on agricultural land, many of whose owners are PPP supporters.
It was unclear Friday how the government planned to appease the IMF or other international donors. But analysts said it had little choice but to make a deal if it hoped to enact any reforms.
“Without this kind of support, the federal government could not do anything,” political analyst Hasan Askari-Rizvi told the Express 24/7 news channel.