Key Party Rejoins Pakistan's Ruling Coalition, Eases Political Crisis

KARACHI, Pakistan -- The second-largest member of Pakistan's ruling coalition reversed its decision to join the opposition Friday, averting the potential collapse of the government in this nuclear-armed nation.

The move by the Muttahida Qaumi Movement, announced after Prime Minister Raza Yousuf Gilani backed down on unpopular economic measures, restored the government's parliamentary majority and eased the political crisis facing Pakistan. But the government's concessions could prevent it from receiving billions of dollars in international loans, exacerbating the country's already precarious financial position.

That possibility poses a major concern to the United States, which is wary of instability in Pakistan and is reliant on the country for help in battling Taliban and al-Qaida militants in the region.
The MQM's decision to rejoin the coalition came a day after Gilani said the government would reverse unpopular fuel price hikes that partly prompted the party's defection. He also said Friday during a visit to MQM headquarters in the southern port city of Karachi that the government would postpone a new tax system meant to raise more revenue.

"Our unity will benefit both the country and the national interest," said Gilani, while standing next to senior MQM leader Raza Haroon. "We can steer the country out of this storm."

Haroon said the MQM agreed to rejoin the coalition for the sake of democracy and the country's well-being. The party quit the coalition Sunday, citing anger over the government's decision to increase fuel prices up to 9 percent on New Year's Eve and its failure to combat corruption.

But some analysts have said the MQM was likely motivated by self-interest and may have defected to force concessions that would increase its power in its main stronghold of Karachi. It is unclear if the government has agreed to anything on that front.

The MQM may have also taken up the mantle of populist anger over unpopular economic measures to improve its performance in the next set of parliamentary elections, which are scheduled for 2013 but could be called earlier.

Even though the MQM rejoined the coalition, Haroon said it would hold off on reinstalling its ministers in the Cabinet, possibly to retain some leverage over the ruling Pakistan People's Party.
The move to reduce fuel prices and hold off on tax reform will deepen the country's deficit, which could lead the International Monetary Fund to withhold billions of dollars in loans desperately needed to stabilize the shaky economy.

IMF spokeswoman Caroline Atkinson criticized the fuel price decision Thursday, saying Pakistan needed to reduce the amount of money it is spending on energy subsidies.

"They're inefficient and untargeted so that the bulk ... of the benefit from the energy subsidy goes to higher-income individuals and large companies," Atkinson said.

U.S. Secretary of State Hillary Clinton also criticized the decision, calling it "a mistake to reverse the progress that was being made to provide a stronger economic base for Pakistan."

The U.S. has pledged billions of dollars in civilian aid to bolster Pakistan's economy, but Clinton has said repeatedly that the country must reform its tax system to increase the amount of revenue it is generating domestically.

Even though the government survived the recent political crisis, it was severely weakened and is unlikely to get much done legislatively in the two years remaining in its term, said independent analyst and columnist Mosharraf Zaidi.

"There's a good chance it'll complete its mandated tenure, but it will do so literally continuing to stumble and sputter from one crisis to next," he said.

It is unclear how the country's main opposition party, the Pakistan Muslim League-N, will respond to the MQM's decision to rejoin the ruling coalition. PML-N chief Nawaz Sharif gave the PPP a six-day ultimatum Tuesday to agree to a series of demands to avert the government's collapse, including reversing the fuel price hikes, reducing government expenditures and removing party officials allegedly involved in corruption.

Political analyst Hasan Askari Rizvi said MQM's quick reversal means PML-N "has been left out in the cold" and will reduce the opposition's ability to put pressure on the ruling party.
Associated Press writers Nahal Toosi and Munir Ahmed contributed to this report from Islamabad.