KARACHI, (Reuters) – The second largest party in Pakistan’s coalition said yesterday it would go into opposition, depriving the government, a strategic U.S, ally of its majority in the National Assembly.
The Muttahida Qaumi Movement (MQM) said the decision had been taken because of the government’s fuel prices policy. It means Prime Minister Yusuf Raza Gilani’s administration may now collapse.
“It has been decided. We will sit on the opposition benches in the National Assembly and the Senate,” MQM spokesman Wasay Jalil said.
The MQM, which is the dominant political force in the financial capital Karachi, last week withdrew its two ministers from the federal cabinet because of what it said was the government’s failure to improve security.
Gilani said his Pakistan People’s Party (PPP) government would not fall despite the MQM move, one that comes as the South Asian country struggles to improve its fragile economy and contain militancy problems that have kept investors away.
Foreign direct investment fell by 21.5 percent in the first five months of 2010 to $573.3 million because of factors such as militant violence. Although the stock market closed up 28 percent in 2010, partly due to foreign buying, these funds are easier to pull out during troubles and are among the cheapest in the region. Foreign investors would likely start to pull out if the government falls.
Analysts said forming a new coalition would likely be a protracted, delicate process and the more likely scenario could be that a early election, due in 2013, might be forced on the government.
The opposition can now move a no-confidence vote against the prime minister in parliament.
President Asif Ali Zardari’s aides have been trying to win back the Jamiat-e-Ulema-e-Islam (JUI), a small coalition partner, which left the government last month over the sacking of one of its ministers and sat with the opposition.
Pakistan’s government has relied on an $11 billion IMF loan agreed in 2008 to keep the economy afloat. It is under pressure to implement reforms to secure the sixth tranche.
“With the MQM leaving the coalition, the fragility of the government is exposed and it is highly unlikely that the government will now be able to take the tough decisions required to get the economy back on track,” said Asad Iqbal of Faysal Asset Management.
The turmoil is likely to raise concerns in Washington that its ally is too politically unstable to contain homegrown Taliban militants, who have been stepping up suicide bombings, and help American efforts to pacify Afghanistan.
An MQM statement said the decision to break with the coalition was taken because of the government’s fuel price policies.
“Right at the start of the new year the government has raised the prices of petrol and kerosene oil, which is unbearable for the people who are already under pressure from the already high prices,” said an MQM statement.
“In such a situation, the MQM considers it unfair with the people of Pakistan to sit in the government.”
The MQM remains in the ruling coalition in the southerly Sindh province.
