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A key member of Pakistan's ruling coalition reversed its decision to join the opposition Friday, averting a possible collapse.
In doing so, however, it put off reforms demanded by the International Monetary Fund (IMF), the United States and other international donors.
The Muttahida Qaumi Movement (MQM) announced it would rejoin the coalition government with the Pakistan People's Party (PPP) after Prime Minister Yousaf Raza Gilani agreed to the party's key demand that it cancel a recent fuel-price hike.
Gilani also said the government would drop an expanded sales tax proposal that it had promised to the IMF but which had been opposed by the MQM and opposition parties.
The MQM cited anger over the government's decision to increase fuel prices up to 9 percent on New Year's Eve and its failure to combat corruption when it quit the coalition Sunday.
The government's concessions could prevent it from receiving billions of dollars in international loans.
Secretary of State Hillary Clinton called the reversal a "mistake" that would damage Pakistan's efforts to shore up its economy and thus further destabilize the country.
The United States has pledged billions of dollars in civilian aid to bolster Pakistan's economy, but Clinton has said repeatedly that the country must reform its tax system to increase the amount of revenue it generates domestically.
MF spokeswoman Caroline Atkinson criticized the fuel price decision Thursday, saying Pakistan needed to reduce the amount of money it is spending on energy subsidies, the Associated Press reported.
"They're inefficient and untargeted so that the bulk ... of the benefit from the energy subsidy goes to higher-income individuals and large companies," Atkinson said.
But Gilani, who visited MQM headquarters in the southern port city of Karachi Friday, said the move was necessary to restabilize a country battling religious extremism and a powerful Taliban insurgency.
"Our unity will benefit both the country and the national interest, Gilani said in Karachi while standing next to senior MQM leader Raza Haroon. "We can steer the country out of this storm."
Amid the political crisis, the PPP was further rocked this week by the brutal public killing of a prominent liberal politician by his bodyguard.
Punjab Governor Salman Taseer, a political ally of the prime minister, was assassinated Tuesday at an upscale Islamabad market, apparently for his outspoken opposition to the country's anti-blasphemy law.