Jan. 3 (Bloomberg) -- Pakistan’s ruling party moved to buttress its coalition government after its biggest ally withdrew, leaving Prime Minister Yousuf Raza Gilani without a parliament majority for his battles against Asia’s highest inflation and Taliban guerrillas.
Gilani met Shahbaz Sharif, the chief minister of Punjab province and president of the Pakistan Muslim League (Nawaz), the largest opposition party in the country’s parliament. The prime minister also met Chaudhry Shujaat Hussain, leader of the Pakistan Muslim League (Quaid), the second-largest opposition party.
“Nothing will derail the nation’s democratic process,” Gilani told reporters after meeting Hussain. “I have asked both the parties to support democracy and strengthen institutions by supporting the government.”
Gilani’s interlocutors offered no details on the extent to which they might support his government. While the main opposition parties say they will not try to oust Gilani with a parliamentary no-confidence vote, political science professor Rasul Bakhsh Rais and other analysts said the government’s unpopularity -- amid 15 percent inflation, electricity shortages and insurgencies -- will hamper its efforts to pull new allies into the coalition.
U.S. State Department spokesman Philip J. Crowley said the U.S. did not think the political situation would make it harder for Pakistan to pursue militants and get “its financial house in order.” Speaking in Washington, Crowley said that while the situation is a challenge, “these things happen in parliamentary systems all the time.”
Gilani’s main ally, the Muttahida Qaumi Movement, quit the government yesterday over a Jan. 1 increase in state-controlled gasoline prices. That move weakens the government’s chances of broadening taxes as demanded by the International Monetary Fund, and will add to its distractions as the U.S. pushes for new attacks on the Taliban, analysts said by phone.
“The government can forget pushing its bill for tax reforms after yesterday,” said Rais, a professor at the University of Management Sciences in Lahore.
Hussain’s faction has 51 members in the 342-seat National Assembly, according to the election commission, more than twice the seats of the Karachi-based MQM. It is unclear how many of its members would join a government widely seen as discredited, said Talat Masood, a political consultant in Islamabad, the capital.
The PMLQ, founded with backing from the former military ruler, General Pervez Musharraf, is unlikely to alter policies on the Taliban if it joins the government, Masood said.
“We will not blackmail the government and will continue opposing and supporting it on national issues,” Hussain told reporters. “We do not want to destabilize the government and continue our role as an opposition party.”
The MQM walkout follows months of popular criticism of Gilani and President Asif Ali Zardari over their failure to control rising prices and over the government’s response to devastating floods in August. The MQM is still part of the government coalition in the southern province of Sindh.
The party mainly represents Mohajirs, people whose families moved to Pakistan from what is now India when Britain partitioned the subcontinent in 1947. The MQM for years has fought political and street battles against Zardari and Gilani’s Pakistan Peoples Party, and the ethnic Pashtun Awami National Party, for dominance in Karachi.
Ethnic and political power struggles in the port city killed 705 people last year, Pakistan’s English-language Daily Times newspaper reported Jan. 1, without citing the source for its count. The 2010 surge in such violence added to the pressures on the government, which the U.S. depends on to support its war against the Taliban in neighboring Afghanistan.
In Gilani’s search to stabilize his government, “much will depend on the Pakistan Muslim League (Quaid),” said Rais. The main opposition party of former Prime Minister Nawaz Sharif “would like to see early elections, but they don’t want to be seen as pulling the government down,” he said. Gilani’s term runs until 2013.
Pakistan’s benchmark Karachi Stock Exchange KSE100 Index lost 1.4 percent to 11,849.46 at the close, its steepest drop in over four months.
“Investors turned cautious as they see there can be major changes in the government setup,” said Ahmed Rauf, a trader at JS Global Capital Ltd. in Karachi. “After the MQM withdrew, the government is in a minority in parliament.”
Small Tax Base
The IMF 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 U.S. Secretary of State Hillary Clinton told Congress last year that Pakistan’s elite “do not pay their fair share” in taxes.
The departure of the MQM leaves Gilani’s coalition with 158 seats in the lower house of parliament, while opposition parties have 173 members, Geo television reported yesterday.
“I never enjoyed a majority in the house, and yet I have remained prime minister for three years after I received a unanimous vote from the house,” Gilani said. A smaller, religious party, the Jamiat-e-Ulema-e-Islam (Fazal) left the government last month and has called for Gilani’s resignation.
The MQM will not challenge Gilani’s position with a no-confidence vote, and “for now, we are only sitting on the opposition benches,” party spokesman Wasim Akhtar said in a telephone interview yesterday. To draw the MQM back into his coalition, Gilani would have to at least cancel the New Year’s 7 rupee increase in the price of a liter of gasoline, said Qamar Mansoor, another party spokesman.
The price of a liter of gasoline is about 80 rupees (93 cents) following the increase. Pakistani consumer prices jumped 15.5 percent in November from a year earlier, the highest rate among 17 Asian economies tracked by Bloomberg.
Nuclear-armed Pakistan is a critical U.S. ally in the fight against al-Qaeda and the Obama administration is pressing it to cooperate more fully in the war against the Taliban in neighboring Afghanistan. Zardari’s cooperation with President Barack Obama has not been popular, particularly his tolerance of U.S. drone missile attacks on tribal areas on the Pakistani side of the border.
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