Pakistan’s main govt coalition partner quits

KARACHI (Reuters) - The second largest party in Pakistan’s coalition said on Sunday it would go into opposition, depriving the government, a strategic U.S. ally, of its majority and raising the prospect of an early election.

The Muttahida Qaumi Movement (MQM) said the decision had been taken because of the government’s fuel prices policy. It means the opposition now has the numbers in the National Assembly to force a no confidence vote against Prime Minister Yusuf Raza Gilani. Losing such a vote could trigger an election.

However, while analysts doubted that Gilani would see out his term, which ends in 2013, an immediate election was probably not the most likely scenario. The MQM may seek to extract concessions from the government in exchange for renewed support.

The uncertainty is likely to reinforce the impression that Pakistan’s civilian leaders are usually too consumed by power struggles to tackle the most pressing issues -- such as poor government services, poverty, corruption and power cuts. The powerful military, which has ruled Pakistan for more than half of its 63-year history, is seen as a far more effective institution.

MQM leader Saghir Ahmed said the party has not decided whether it will encourage a no-confidence vote.

“We don’t want to destabilise the government. We have given them time. If they fail to address our demands, we will consider taking further tough actions,” he told Reuters.

The MQM, which is the dominant political force in Pakistan’s biggest city and 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.

On Sunday it decided its elected members would sit on the opposition benches in the National Assembly and the Senate.

Gilani said his 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 fell.

The chances of the opposition forming a new ruling alliance are slim, as the biggest opposition party in the assembly, former prime minister Nawaz Sharif ‘s Pakistan Muslim League (PML-N), does not enjoy close ties with other opposition parties.

“There is no immediate danger of the government’s collapse but it is in deep crisis,” said political analyst Hasan Askari Rizvi.

President Asif Ali Zardari ‘s aides have been trying to win back the pro-Taliban Jamiat-e-Ulema-e-Islam (JUI), a small coalition partner, which left the government last month over the sacking of one of its ministers.

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 and show greater fiscal discipline 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 will raise concerns in Washington that its strategic ally is too politically unstable to contain Taliban militants, who have been stepping up suicide bombings despite security crackdowns, and help American efforts to pacify Afghanistan .

An MQM statement said the decision to break with the coalition was taken because of government 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 Sindh province, in the south.