Gilani to Meet Former Ally After Agreeing to Reduce Pakistan Fuel Prices

Pakistan Prime Minister Yousuf Raza Gilani will meet leaders of a former allied party today after conceding to its demand for lower gasoline prices as he seeks to heal a rift that threatens the government.

Gilani is expected at the Karachi offices of the Muttahida Qaumi Movement at 2 p.m., Saif Abbas, a party spokesman, said by phone. Gilani yesterday reversed a Jan. 1 increase in fuel prices that the MQM cited as the reason it was ending support for his administration. U.S. Secretary of State Hillary Clinton urged Pakistan to stick with its economic reforms and not “reverse progress.”

“The Muttahida will issue a statement about the government’s fuel-price rollback after a meeting of its decision-making body, the co-ordination committee in Karachi and London,” another party spokesman, Qamar Mansoor, said in a telephone interview. The MQM’s departure had stripped Gilani’s government, a key ally in the U.S. fight with Taliban guerrillas in Pakistan and Afghanistan, of its majority in parliament.

Mansoor said Jan. 2 his party would return to the government if it reversed the gasoline hike. Ending its opposition would bolster Gilani and embattled President Asif Ali Zardari, whose grip on power was further undermined by the Jan. 4 assassination of a key aide, the governor of Punjab province.

Photographer: Asad Zaidi/Bloomberg

Pakistan’s Prime Minister Yousuf Raza Gilani. Close

Pakistan’s Prime Minister Yousuf Raza Gilani.

Close
Open
Photographer: Asad Zaidi/Bloomberg

Pakistan’s Prime Minister Yousuf Raza Gilani.

Pakistan’s main opposition leader, former prime minister Nawaz Sharif, had further cranked up the pressure, saying he would campaign for the government’s fall unless the ruling alliance meets a Jan. 10 deadline to begin a crackdown on corruption and withdraw the energy price increase.

Clinton Call

After the new year’s price increase, the cost of a liter of gasoline rose to 79.67 rupees (93 cents). Pakistani consumer prices jumped 15.5 percent in November from a year earlier, the highest rate among 17 Asian economies tracked by Bloomberg.

Opposition parties are “refusing to recognize the dilemma the government faces,” said Rasul Bakhsh Rais, a professor of political science at the University of Management Sciences in Lahore. Actions taken for “political reasons and not for economic rationality” make it likely “the government will be forced to print more money and that will add to inflation.”

Clinton said Gilani’s government should continue with its plan to strengthen Pakistan’s economy, which includes reducing popular subsidies.

“The government of Pakistan must reform its economic laws and regulations, including those that affect fuel and its cost,” Clinton said in Washington. “It is a mistake to reverse the progress that was being made to provide a stronger economic base for Pakistan, and we will continue to express that opinion,” Clinton told journalists.

IMF Loan

The International Monetary Fund last year withheld more than 10 percent of an $11.3 billion loan to pressure Pakistan to broaden what is one of the world’s smallest tax bases. Pakistan’s agricultural sector, dominated by politically powerful landholding families, is exempt from taxation, and Clinton told Congress last year that Pakistan’s elite “do not pay their fair share” in taxes.

The U.S. has been pouring money into Pakistan since the 2001 invasion of Afghanistan to oust the Taliban regime that harbored al-Qaeda leader Osama bin Laden.

The funding has included $12.5 billion in security assistance since fiscal 2002 as reimbursement for Pakistan’s contribution to combating terrorism, according to figures compiled by the nonpartisan Congressional Research Service.

Military assistance aside, Congress in 2009 approved $7.5 billion in aid to build Pakistani roads, schools, power facilities and infrastructure for civilians.

Parliament Meet

Gilani met with leaders of the main political parties in the parliament building in Islamabad yesterday and said the government has removed the nearly 7-rupee increase in the price of a liter of gasoline, taking the rate back to 72.96 rupees (85 cents).

“We took the leaders of all political parties into confidence,” the prime minister, said in a speech to legislators. “We have managed to succeed in resolving this public issue.”

Sharif, who had initially given Gilani 72 hours to adopt his agenda, extended the period by three days after the governor of Punjab province was assassinated in the capital. Salman Taseer, a senior member of Zardari’s Pakistan Peoples Party, was shot 27 times by one of his guards as he left an Islamabad restaurant Jan. 4.

To contact the reporters on this story: Khurrum Anis in Karachi at kkhan14@bloomberg.net; Peter S. Green in New York at psgreen@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.