Pakistan risks crisis: World Bank

Praful Patel, a vice president at the bank, said the South Asian country needs to make painful adjustments to higher global prices for oil, commodities and foodstuffs or risk a slowdown.

"There is not yet a crisis, but the economic picture for Pakistan is not good," Patel said. "There is a good economic foundation, but the growth can only continue if Pakistan adjusts to the new global reality."

Patel issued a statement after a three-day visit to Pakistan, which included talks with leaders of the new government taking power after eight years of military rule under President Pervez Musharraf.

Musharraf, who seized power in a 1999 coup, guided Pakistan from the brink of bankruptcy to multiyear economic growth.

A United Nations report released on Thursday said that Pakistan's economy was expected to grow at 6.5 percent this year, despite uncertainty about stability in the country, which faces rising Islamic extremism and a bumpy transition back to democracy.

But some economists warn the current expansion is heavily reliant on a boom in consumer spending and money sent home by Pakistanis working abroad and that the country produces too few high-value exports.

In the short term, there is particular concern about the government's rising budget deficit and a shortfall in the balance of payments. Both are putting downward pressure on the Pakistani currency, the rupee.

Patel noted that foreign investment and remittances have kept pace and that the stock market has posted gains. The Karachi Stock Exchange's benchmark index closed at a record on Thursday.

However, he forecast that the government would miss its targets for the budget and current account deficits as well as for foreign exchange reserves.