Petrol politics, bad economics

MQMs rejoining the government on the PMs visit was quite similar to the actions of a typical Pakistani cricketer, who quits captaincy, retires form cricket and suddenly out of nowhere is back in the team.
The action in the roader interest of Pakistan and its public would certainly be dampening for the Raiwind stalwarts who were waiting for the governments response to their ultimatum on the multipoint reform agenda.
The government is suddenly back in majority in a weeks time but the cost that it paid to get out of trouble might haunt it in the future as it has set a dangerous precedent. The seat-saving decision of reversing the hike in petroleum products prices has all the makings of a minority government and displayed the desperation to do almost anything to buy more time, which it did quite successfully.
All the government can do now is sit back and hope the international crude oil prices cool down to the October level - the chances of which appear slim as oil is heading northwards in the international market and is expected to stay stronger.
So what will the government do come January 31, if the need arises to jack up the petrol price? The opposition parties will again demand the prices to be frozen at the current level. The ack in coalition MQM may not have enough moral grounds to ask the government not to burden the masses for they cannot threaten to step out again and bargain. But then, politics in Pakistan is hardly about morality, so don be surprised as the MQM might well join the chorus.
And the move has already been viewed in bad taste by the Americans who have expressed their displeasure. It may not do any harm to the IMF programme as petroleum prices are not a part of the agenda but the precedent it has set maybe dangerous for the electricity tariffs too which are under the reform process and any massive increase might again push the government to the corner and the IMF will surely disapprove of any such move.
In a time when the fiscal deficit is expected to cross 7 percent, according to some experts, and the government has deferred the RGST imposition on demand of its collation partners, the recent blow to the petroleum levy must be disturbing for the Finance Ministry.
Such decisions are bound to irritate the finance team as it will not be in a position to continue the reform agenda when such political moves overtake economic decisions. Pakistan can ill-afford a major shift in the finance ministry at this juncture which could well be a result of such moves by the government
The price hike reversal might well buy the government some more time, but it won be long before the government will face another uphill task come the end of month. If the recent move is not a one-off decision, it could prove to be catastrophic for the fiscally constrained government.