ISLAMABAD, March 27: Rapid adjustments and reforms are necessary to avert “an economic crisis” in Pakistan, says a senior World Bank official.

“Pakistan will need international community’s support in the coming months. If action is not taken, the economy will start to falter,” warned Praful Patel, vice-president of the World Bank, after a three-day visit to Pakistan.

“But with right policies and strong support from multilateral and bilateral partners, we believe the high growth and poverty reduction path can be maintained in Pakistan,” he said in a statement issued by the World Bank’s local office on Thursday.

Mr Patel said that high international prices of petroleum products and food items were creating challenges for Pakistan’s economy.

“There is not yet a crisis, but the economic picture for Pakistan is not good,” he said. International prices had continued to rise, but policies and administered prices had not kept pace in Pakistan.

“Growth has been robust over the past few years and there has been a significant reduction in poverty. There is a good economic foundation, but the growth can only continue if Pakistan adjusts to the new global reality, including high prices for oil, commodities and foodstuffs such as wheat.

Countries like the United States and Japan and the European Union were facing the same reality, Mr Patel said.

He said that while foreign direct investment (FDI) and remittances had maintained pace and the stock market posted gains, fiscal deficit, inflation, current account deficit and foreign exchange reserves would miss their target this year.

During his three-day visit, Mr Patel held talks with economic officials and leaders of the new government and discussed ways of protecting poor people in case domestic prices were adjusted.

During meetings with Pakistan People’s Party co-chairman Asif Zardari and members of Prime Minister Yusuf Raza Gilani’s advisory team, the World Bank official discussed appropriate adjustments, particularly in oil imports, tax policy reforms, prioritisation of expenditures and safety nets to protect the poor.

Mr Patel also offered World Bank’s technical assistance to develop an international best practice in responding to the current situation.

“Any adjustment will be painful. But there must be an appropriate safety net for the poor. The incoming team has sought our support, and we will help ensure that there are smart subsidies to the poorest. These must be well targeted and efficient programmes, including cash transfers, where leakage is minimised,” he said.

“We know this can be done because we saw the excellent response after the earthquake where affected families were provided relief and cash transfers quickly and effectively.”

Mr Patel reaffirmed his bank’s ongoing commitment to Pakistan and said that while there had been some political and security uncertainty over the past few months, the World Bank’s programmes in Pakistan were on track and would continue in other areas such as infrastructure, education, local governance and social protection.

In his meeting with PML-N president Shahbaz Sharif, the World Bank official echoed this commitment, noting the good results achieved in the bank’s partnership with Punjab.

However, he said that more needed to be done to extend the partnership to other critical areas for growth and poverty reduction, including the small-scale private sector development.