sector restructuring, trade liberalization, picking up pace towards deregulation of the economy and generally moving towards a market - led economic regime. a stand - by imf programme was put in place in november 2000, which was successfully implemented followed by a three - year poverty reduction and growth facility ( prgf ), which was successfully completed in december 2004. it is a matter of pride that pakistan decided not to draw down the last two tranches although it was eligible to do so. the imf has also decided that pakistan will not be subject to the usual post - program monitoring due to its good economic standing. pakistan ’ s economic turnaround during the last five years is even more impressive because the country was faced with a critical and fragile regional and domestic environment with constant threats to security ( a result of playing key role as a frontline state in the war against terrorism ) a prolonged and severe drought, tensions with india and high oil prices. macroeconomic stability : macroeconomic stability has been achieved through reduction in fiscal deficit, acquiring a surplus on the current account balance of payments, lowering of inflation, and a transformation of external debt profile. these have been brought about partially through the support of international financial institutions and the paris club bilateral creditors which significantly eased the external payments position that had been a major and consistent risk to the economy since 1998. fiscal deficit was reduced by pursuing a combination of four set of policy measures ( i ) mobilizing additional tax revenues ( ii ) reducing subsidies to public enterprises and corporations and ( iii ) bringing about a significant decline in debt servicing payments and ( iv ) containing defence expenditures. monetary policy was kept reasonably tight during the first two years with money supply growth at about 9 percent. expansion in private sector credit, in the subsequent years, did not put much pressure as the government borrowing was limited to a manageable level. as the monetary conditions improved the interest rate came down gradually to a single digit and demand for credit by the private businesses picked up resulting in higher capacity utilization in manufacturing and increased industrial production. external debt management focused on ( a ) reprofiling of the stock of official bilateral debt, ( b ) substituting concessional loans for non - concessional from international financial institutions, ( c ) pre - paying expensive loans and ( d ) liquidating short term liabilities. debt ratio was thus reduced from 100 percent of gdp to 60 percent in five years time. trade policy in pakistan has been categorized by the world bank as one of the least restrictive in

and deposits. the interest rate structure has been deregulated and monetary policy uses indirect tools such as open market operations, discount rates etc. domestic interest rates on lending have dropped to as low as 5 percent from 20 percent substantially reducing financial costs of businesses. central to the economic reforms process has been a clear progression towards deregulation of the economy. prices of petroleum products, gas, energy, agricultural commodities and other key inputs are determined by market. imports and domestic marketing of petroleum products have been deregulated and opened up to the private sector. the markets do not always function effectively. independent regulatory agencies have been set up to protect the interests of consumers and end - users of utilities and public services. tax reforms : taxation reform has figured prominently on the government's agenda, as this is another area where the business community has innumerable grievances and dissatisfaction with the arbitrary nature of tax administration. tax reforms are aimed at broadening the tax base, bringing in tax evaders under the tax net, minimizing personal interaction between tax payer and tax collector, eliminating the multiplicity of taxes and ultimately reducing the tax rate over time. a massive survey and documentation drive was undertaken to widen the tax base, extend incidence to all sectors of the economy and develop the data for purposes of assessment. universal self assessment system has been introduced for tax collection whereby the returns submitted by the tax payers are taken as final settlement of their tax liabilities. only a random sample of returns is picked up for audit. this system has been welcomed by the tax payers. the central board of revenue ( cbr ) is being restructured to improve tax administration including taxpayer facilitation. tariff reforms pakistan made significant efforts in liberalizing its trade regime during the 1990s. the maximum tariff rate has declined from 225 percent in 1990 - 1 to 25 percent ; the average tariff rate stands at just 11 percent compared to 65 percent a decade ago. the number of duty slabs has also been reduced to four. quantitative import restrictions have already been eliminated except those relating to security, health, public morals, religious and cultural concerns. the number of statutory orders that exempted certain industries from import duties has been phased out by june 2004 and import duties on 4, 000 items were reduced. these measures have brought down effective rate of protection, eliminated the anti - export bias and promoted competitive and efficient industries. a number of laws have also been promulgated to bring the trade regime in conformity with world trade organization