TOM WRIGHT The government of President Asif Ali Zardari appeared set to hang on to power despite a disintegration of the ruling coalition Sunday, following signs that a key opposition party is unlikely to force a no-confidence vote. But the governments shaky standing will limit its ability to take unpopular steps, including a tax overhaul, that foreign donors say are needed to avert an economic meltdown. Prime Minister Yousuf Raza Gilani met with Shahbaz Sharif in Lahore on Monday in a bid to avert a crisis. PML-N senior leader Ch Nisar Ali Khan said after the meeting that the party had agreed not to destabilise the government, but didnt elaborate. On Sunday, a key coalition partner of the PPP-led government, the MQM, joined the Opposition, depriving the administration of a majority in the National Assembly, making it difficult to pass much-needed economic overhauls. Where the government has pushed overhauls, such as slashing petroleum subsidies, it has faced a backlash in the National Assembly. The MQM on Sunday cited rising petroleum prices as one reason for joining the opposition. Under Pakistans parliamentary system, a government doesnt fall automatically on losing a majority but must be voted out by a no-confidence motion, passed by a majority of lawmakers. Farhatullah Babar, a spokesman for President Zardari, said the government believed the Opposition wasnt united enough to win a no-confidence vote. The government now faces the challenge of tackling an escalating economic crisis without a majority in the National Assembly. Foreign donors including the International Monetary Fund, World Bank and Asian Development Bank have been frustrated over Pakistans failure to tackle a growing budget deficit by implementing changes aimed at boosting revenue and cutting spending. The US, one of the largest donors to multilateral institutions, has publicly called on Pakistan to do more. In October, Secretary of State Hillary Clinton told a meeting of Pakistans foreign donors in Brussels that the country must boost tax returns, which currently are equal to 10.2pc of gross domestic product, one of the worlds lowest ratios. But the prospect of boosting tax returns appears bleak amid the current political crisis, Pakistani and Western officials say. As the Prime Minister scrambles to save his coalition, in the streets of Islamabad some Pakistanis say they are disillusioned with the present government and want change. Zardaris government has faced opposition from the PML-N to its efforts to bring in Reformed General Sales Tax, a move backed by the US and other donors. The PML-N says such a tax will hurt ordinary Pakistanis. The party wants sectors that benefit the elite but are currently exempt, such as agriculture and construction, to also face taxation. Pakistans budget deficit has grown to between 6pc and 8pc of GDP, above a 4pc target for the current fiscal year to June 30. To fund the shortfall, the government borrowed $3.6b from the central bank from July 1 to early December, a move that amounted to printing money, stoking inflation. Foreign donors have begun over the past six months to withhold aid on which the government depends until tax overhauls and other changes, such as reducing electricity subsidies, are implemented. The World Bank and Asian Development Bank havent transferred any of a combined $3b in budget support pledged for this fiscal year, said a senior Pakistan Finance Ministry official. The IMF has withheld $3.5b from an $11.3b emergency loan package. To be sure, donors are unlikely to allow Pakistans economy to spiral out of control, given the central role the country plays in supporting the US-led war against the Taliban in Afghanistan. For now, Pakistans foreign reserves are worth five months of imports, meaning the government hasnt yet reached a balance of payments crisis like one in November 2008 that forced the country to call in the IMF. The situation could change, however, if the government fails to take action to reduce its deficit, forcing donors to re-evaluate their strategy of withholding funds, said a senior Western official in Islamabad. WSJ