The Muttahida Qaumi Movement (MQM), which had withdrawn support to the Pakistan People's Party-led federal government on Sunday, has decided to return to the ruling coalition without joining the Cabinet. This was decided on Friday after Prime Minister Syed Yusuf Raza Gilani visited MQM's headquarters in Karachi for a meeting with party leaders.

As a result of the MQM decision, the immediate crisis facing the PPP-led coalition vis-à-vis a possible floor test has blown over. With the MQM's return, the coalition is back in majority in the 342-strong National Assembly.

According to MQM leader Raza Haroon, who addressed the media along with Mr. Gilani, the decision to return to the coalition was taken in the interest of the nation and democracy. While the MQM had pulled out its two Ministers in the federal Cabinet about a fortnight ago, it withdrew support to the government on Sunday in protest against the steep hike in the price of petroleum products on New Year's Day.

The government's decision on Thursday to roll back the price hike provided the MQM with a window of opportunity to return to the ruling arrangement. However, Mr. Haroon made it clear that it would continue to oppose anti-people policies.

From all indications, the MQM has also extracted a promise from the government that the controversial Reformed General Sales Tax regime would not be introduced immediately. The government is understood to have decided to first hold consultations with all political parties to mobilise opinion in favour of RGST.

Meanwhile, the International Monetary Fund (IMF), which has been pushing for the RGST as a condition for the next tranche of loan, has criticised the rollback in fuel prices. The IMF said because the subsidies were not properly targeted, the bulk of the subsidy in energy went to the higher income group and large companies.

U.S. criticism

The U.S. has also criticised the decision. Conceding that these were painful policy decisions, the U.S. State Department spokesman said economic reforms were important for Pakistan's long-term stability. Secretary of State Hillary Clinton — an advocate of fiscal management in Pakistan — is reported to have described the rollback as a “mistake”.

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