World Bank issues Pakistan warning

28 March 2008

Pakistan must take immediate action to prevent its economy from collapsing, the World Bank has warned.

The organization said that "painful adjustments" would be needed to prevent a crisis brought on by soaring oil and food prices.

Under president Pervez Musharraf's administration, the country's economy flourished and despite its political turmoil, the United Nations predicted that 2008 growth could reach 6.5 per cent.

There are fears however, that growth, which has been sparked by consumer spending, could be stymied by inflation.

The World Bank said that the rising budget deficit, increased inflation, a growing current account deficit and plunging foreign exchange reserves could all threaten Pakistan's economy unless the new government takes urgent action.

Paful Patel, the World Bank's vice president, said: "If action is not taken, the economy will start to falter, but with the right policies and strong support from multilateral and bilateral partners, we believe the high growth and poverty reduction path can be maintained in Pakistan."

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