Pakistan ditches economic reforms to rescue coalition

Pakistan's ruling party avoided the collapse of its government yesterday after its reversal of unpopular economic reforms helped persuade a key ally not to defect to the opposition.

The Muttahida Qaumi Movement announced it would remain a member of the ruling coalition after a visit to its Karachi base by prime minister Yousuf Raza Gilani. Without the MQM's 25 seats, Mr Gilani's Pakistan People's Party would fall short of the 172 seats needed for a parliamentary majority.

The MQM's decision to rejoin the coalition came a day after Mr Gilani said the government would reverse unpopular fuel price hikes that partly prompted the party's defection. He said yesterday that government would also postpone a new tax system meant to raise more revenue.

"Our unity will benefit both the country and the national interest," he said. "We can steer the country out of this storm."

Senior MQM leader Raza Haroon said his party agreed to rejoin the government for the sake of democracy and the country. The party quit the coalition on Sunday, citing anger over the government's decision to raise fuel prices up to 9 per cent on New Year's Eve and its failure to combat corruption.

The move to cut fuel prices and delay tax reform could put an IMF bailout at risk.