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Pakistani party rejoins government

From Nasir Habib, CNN
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Pakistan's political crisis
  • PM's coalition regains governing majority
  • This comes after a fuel price hike was reversed
  • The MQM has other demands, such as eliminating corruption

Islamabad, Pakistan (CNN) -- An important political party that recently broke from Pakistan's ruling coalition has rejoined the government, a move that has averted a crisis in the South Asian nation.

The Muttahida Quami Movement, or MQM, announced Friday it will return to the coalition government after breaking away last week.

The departure stoked fears about the future of a government the United States has been counting on to confront militants in the country's tribal region, where the Taliban and al Qaeda have a strong presence.

MQM's move means Prime Minister Yousaf Raza Gilani and his Pakistan People's Party now regain their governing majority, which it lost when MQM left his coalition.

The MQM decision comes a day after Gilani announced a reversal of a fuel price hike that went into effect less than a week ago. The price hike -- one of many complaints the party had -- prompted MQM to bolt from the government.

"We have withdrawn the hike in fuel prices," Gilani said, adding "we will not move forward to impose new taxes until a consensus is developed."

Raza Harron, senior leader of MQM, said that his party made the decision "for the sake of democracy, law and order in the country, and to address inflation."

In a visit to MQM's headquarters in Karachi Friday, Gilani told reporters that the government had addressed most of MQM's demands. He also promised that any remaining demands will be resolved with consensus.

Pakistan has one of the smallest tax bases in the world. So there is runaway inflation in the country -- in November, consumer prices jumped over 15% from the year before. That's the highest rate in Asia.

The gas price hike would have helped build that tax base. Without it, the government will probably be forced to print more money -- which adds to the runaway inflation in Pakistan.

But Pakistan's rich land owners are exempt from taxation, so its tax burden is really out of whack. That was MQM's argument against the gas hike -- that it put too much pressure on poor and middle-class Pakistanis, and let the rich get off.

So while the price hike reversal gave Gilani a chance to regain his majority, it brought criticism from international powers.

U.S. Secretary of State Hillary Clinton said it was a "mistake" for Pakistan to reverse the price increase, with the State Department saying the price hike was vital to Pakistan's financial stability.

The International Monetary Fund also criticized Gilani's decision.

"They're inefficient and untargeted so that the bulk of the benefit from the energy subsidy goes to higher income individuals and large companies," IMF spokeswoman Caroline Atkinson said from Washington.

Harron said Gilani has assured his group he will address MQM's other issues: eliminating corruption, reducing the government's expenses and getting rid of foreign aid.

CNN's Chris Lawrence contributed to this report