Islamic party quits Pakistan government over minister

ISLAMABAD  – An Islamic party said on Tuesday it was pulling out of Pakistan's ruling coalition after the dismissal of one of its members as a minister, but the government was not expected to fall.

"It is impossible to stay in the coalition. We are saying goodbye to the government" Jamiat-e-Ulema-e-Islam (JUI) leader Fazal-ur-Rehman told reporters after a party meeting. His party's name translates to "Party of Islamic Clerics."

The decision was taken after Prime Minister Yusuf Raza Gilani sacked two ministers including one from JUI, Muhammad Azam Khan Swati, the minister for science and technology, for publicly trading accusations of corruption.

While the government is highly unlikely to collapse -- the JUI is a small coalition partner -- the move will raise fresh questions over U.S. ally Pakistan's political stability.

The governing coalition, which faces an array of challenges including homegrown Taliban militants and a fragile economy, now holds 181 out of 342 seats in parliament, nine more than the 172 needed to maintain its majority.

Rehman said two other JUI members of the cabinet -- the ministers of tourism and housing -- from his party would also resign.

Gilani's government, struggling to implement reforms needed to secure the sixth tranche of an $11 billion International Monetary Fund loan keeping the economy afloat, could now be distracted by political turbulence.

The IMF's program, agreed in November 2008, is increasingly critical for Pakistan as it grapples with a widening fiscal deficit and summer flood losses of $10 billion.

Pakistan plans to seek an extension of the loan program to win more time to implement the reforms needed to secure the next tranche, a Finance Ministry official has said.

The main issue is Pakistan's slow implementation of a reformed general sales tax (RGST), a key condition for the possible release of the sixth tranche.

"With JUI quitting the coalition, the approval for RGST will become even more challenging," said Asif Qureshi, director at Invisor Securities Ltd.

Rehman said his party would vote against the RGST.

Pakistan is under intense international pressure to broaden its tax-to-GDP ratio, currently around 10 percent, one of the lowest in the world.

Pakistan's most popular politician, Nawaz Sharif, has said his party will oppose any imposition of the RGST.

"The government will find it difficult to sustain itself unless it maneuvers to find new partner," said political analyst Hasan Askari Rizvi.