Islamabad, Mar 29 (IANS): The political situation in Pakistan is one of the main domestic risks to the economy due to uncertainty over the growing tensions between the government and opposition alliance, endangering a fragile economic recovery, the Ministry of Finance warned.

"The domestic and international scenario has begun to change which may have implications for the economic recovery," The News quoted the Ministry as saying in its monthly Economic Update & Outlook.

"Inflationary and external sectors risks are coming into action to build macroeconomic imbalances."

The Ministry in its update said the recent geopolitical tensions, in particular the Ukraine crisis, is the most important external risk factor while "domestic political conditions" are building domestic risks.

"A further escalation of these risks could hamper the positive outlook for Pakistan's economy and may also aggravate the macroeconomic imbalances."

The Ministry said economic performance continues to be strong and is still on a trajectory compatible with an economic growth target of around 5 per cent in the current fiscal year.

"However, the intensity of internal and external risks has still not been exactly realized which may adversely affect domestic economic activities.

"Further, inflation and the current account deficit are still under pressure," it added.