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08ISLAMABAD2525 2008-07-25 13:48:00 CONFIDENTIAL Embassy Islamabad
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1. (C) Summary: The long-awaited expansion of Pakistan's
federal cabinet has been postponed until after coalition
leader Asif Zardari and Nawaz Sharif can meet, likely in the
next two weeks. Zardari planned the expansion to assuage
complaints that he has not handed out enough jobs to Pakistan
People's Party (PPP) loyalists. He was not planning to
replace the Pakistan Muslim League-Nawaz (PML-N) ministers
who withdrew from the cabinet on May 12, but to name State
(Deputy) Ministers who could provide some degree of
governance until the PPP/PML-N gridlock is settled. The GOP
also sacked fourteen cabinet secretaries, many of whom were
considered competent bureaucrats. This decision is likely to
further undermine effective GOP governance. End Summary.

The Cabinet
- - - - - -

2. (SBU) The long-awaited expansion of the federal cabinet
appears to have been postponed "at least until the first week
of August," according to Pakistan People's Party (PPP)
sources quoted in the local media. This distribution of
government largesse had been much rumored since Prime
Minister Yousuf Gilani reportedly returned with a list of
names and appointments from his July 9 Dubai meeting with PPP
leader Asif Zardari.

3. (C) According to PPP contacts, Zardari has decided to use
the cabinet expansion to address discontented PPP factions.
He also still hopes to woo the Pakistan Muslim League-Nawaz
(PML-N) back to its assigned ministries, intending to appoint
many state ministers (similar to our deputy secretaries) in
the interim. (Note: PML-N leader Nawaz Sharif had pulled his
federal ministers from the PPP-led cabinet on May 12, so the
already-appointed PPP ministers have been covering double

4. (C) Meeting PolOffs July 23, PML-N Spokesman Siddique ul
Farooq revealed a PPP Zardari/PML-N Sharif meeting was in the
offing sometime in the next two weeks. Farooq further warned
that, if the PML-N did not get satisfaction on the issues of
restoration of the pre-November 3 judiciary or impeachment of
President Pervez Musharraf, the coalition could be in
jeopardy. Postponement of the cabinet expansion now appears
timed after such a meeting's outcome.

Other Shake-ups
- - - - - - - -

5. (C) The PPP has not hesitated to switch out other key
non-cabinet posts. Fourteen ministry secretaries (the
highest level civil servant within a ministry) have been
removed, in one form or another, from their positions. These
were often highly competent, well-placed technocrats.

6. (C) For example, Petroleum Ministry Secretary Farrukh
Qayyum was this week placed on "special home duty," without
an onward assignment. Officially, the GOP removed Qayyum
because of a ministry "mathematical error," involving the
significant increase in the price of natural gas several
weeks ago. Petroleum Ministry Additional Secretary G.N.
Sabari has been named Acting Secretary in the interim.
Sources confided to EconOff July 24 that Qayyum had been
removed because he allegedly refused to implement natural gas
surcharge to benefit coalition leaders who own numerous CNG
stations across the country.

7. (C) Additionally, Federal Board of Revenue (FBR) Chairman
M. Abdullah Yusuf was removed July 23, replaced by Ahmad
Waqar, former Secretary of the Investment Division. As a key
player in past economic reform measures, Yusuf was reportedly
viewed as too close to Musharraf. He also reportedly
strongly objected to GOP plans to remove high-level
consultants placed throughout the ministries.

8. (C) Religious Affairs Ministry Secretary Vakil Ahmed Khan
was removed July 16. Khan had been instrumental, where other
GOP agencies had failed, in getting the leadership of an

ISLAMABAD 00002525 002 OF 002

umbrella madrassah organization, to register its madrassahs
during the Musharraf government. As Religious Affairs
Secretary, Khan also had the authority to grant permits to
Hajj tour operators. Reportedly, Khan refused to increase
the number of tour operators for Hajj this year or to charge
a new USD 15 fee for each Haji, as the PM's Advisor on
Religious Affairs had wanted.

9. (C) Comment: Pakistan's federal ministers, just months in
office, are spread thin, covering multiple portfolios. While
the need to expand the cabinet is recognition on Zardari's
part that this situation in unsustainable, the delay, now for
two more weeks, is unhelpful in the face of rising security
and economic concerns. Meanwhile, however, rumors are
increasing of PPP members pushing through changes in other
non-cabinet posts for reasons of personal gain. End comment.