For example, the access to external finance is made difficult by the small range of available financial instruments . Basic instruments like preferred stocks and stock options are non-existent in the equity markets. This raises the cost of capital thus reducing the international competitiveness of Pakistani manufacturers. The access to foreign credit financing is restricted by existing imperfections in the market for forward cover for credit related transactions. In particular, the surrender requirement restricts the forward supply of foreign exchange, increases the transaction costs associated with the cover and prevents the spot and forward interbank market from developing.
Serious constraints exist for the development of an efficient local bond market .
A well functioning local bond market is especially important to attract long term investments, and increase the volume of long term lending in local currency. This is particularly relevant in view of the large infrastructure needs and the precarious foreign balance position of the country. The development of the local bond market depends critically on the participation of players that are willing to provide long term investment resources, such as pension funds and insurance companies. Redressing the persistent fiscal imbalances, modernizing the rules and regulations governing pension funds and insurance companies and promoting private sector participation in these areas, would remove major obstacles to the development of the local bond market and provide a significant source of long-term finance for industry. Export Growth .