The MQM left the government in protest the last time fuel prices were raised in January and only rejoined the coalition after the hike was reversed. The MQM had sharply criticised the latest price increase, raising fears it would quit again. - Photo by AFP.

KARACHI: Pakistan's coalition government appeared on Thursday to have avoided a potentially destabilising crisis after a key partner dropped demands to scrap a fuel price hike that is part of vital financial reforms. 

Sources in the Muttahida Qaumi Movement (MQM), the third biggest party in the coalition, said on Thursday the party was discussing with President Asif Ali Zardari ways to offset the effect of the almost 10 per cent fuel price increase imposed on March 1. 

“Our team is meeting the president and the finance minister to work out ways to provide relief to the people,” said a senior MQM leader who declined to be identified. 

“We are a party with an open mind, and we are ready to listen to everyone if it can help provide relief for our people,” he said, adding that a Friday deadline given by the MQM to overturn the fuel price increase had been withdrawn. 

The MQM left the government in protest the last time fuel prices were raised in January and only rejoined the coalition after the hike was reversed. The MQM had sharply criticised the latest price increase, raising fears it would quit again. 

Political stability in Pakistan, a key ally of the United States in the region, is considered vital for ending the war in Afghanistan. 

Analysts said keeping the MQM in the coalition would signal to the International Monetary Fund that Pakistan was serious about its pledges for financial reform. Pakistan relies on an $11 billion bailout package that has propped up its flailing economy since 2008. 

A key condition of the next tranche of the seven-part loan, currently under review, is fiscal reform, including tax increases and ending subsidies.