ISLAMABAD — 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.
The Muttahida Qaumi Movement’s return, which restored the ruling coalition’s parliamentary majority, came one day after Prime Minister Yousuf Raza Gilani 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.
Although the MQM’s move resolved the latest political crisis to rock the volatile, U.S.-backed South Asian nation, it also highlighted how beholden President Asif Ali Zardari’s ruling Pakistan People’s Party is to its coalition partners.
Gilani said the government would also drop an expanded sales-tax proposal 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 — an outcome that U.S. officials fear could further destabilize a country battling rising Islamist extremism and a powerful Taliban insurgency.
The MQM, which is dominant in the southern metropolis of Karachi, pulled out of the coalition Sunday, several days after a similar defection by a smaller religious party.
On Friday, the MQM said it welcomed the government’s latest decisions, with Raza Haroon, a senior MQM leader, declaring that the reunited coalition would now “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.
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 government’s efforts have been stymied by political allies and rivals. The MQM, which says the 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.
