pso ) - the two giants - are under implementation. deregulation as pakistan has embarked on the process of creating competitive markets and eliminating direct or implicit consumer and producer subsidies, a number of steps have been taken to deregulate prices and trading in various sectors. the most far - reaching reform has taken place in the oil and gas sector. imports and pricing of petroleum products have been deregulated and the private sector is now free to import and fix prices. an automatic price adjustment formula for consumer prices of petroleum products linked with international prices has been adopted. price distortions in natural gas have also been eliminated and new pricing framework has been put in place. the government has freed up agricultural prices by moving towards market based pricing. with a view towards allowing farmers to receive international prices for their produce, all restrictions on the import and export of agricultural commodities have been removed. wheat procurement and trade, which was until recently an exclusive monopoly of the state, has been opened up to the private sector. exports of wheat and wheat products have also been allowed to the private sector. financial sector reforms financial sector has made the farthest progress by transforming itself into a market oriented, private sector dominated sector performing efficient intermediation. the regulatory and supervision functions of the state bank of pakistan have been significantly strengthened, and strict enforcement of prudential regulations have led to widespread recapitalization and a consequent improvement in the efficiency and profitability of banking system. more than 80 percent of banking assets are now owned and managed by the private sector. the ratio of net non - performing loans ( npls ) to total advances in pakistan, has been brought down to less than 5 percent through a variety of strategic measures. an asset management company, the corporate and industrial restructuring corporation ( circ ), has taken over a large volume of non - performing loans of ncbs and dfis at a discount and disposed them off to third party buyers. development financial institutions ( dfis ) have been restructured through mergers and acquisitions, closure, liquidation and reorganization. auction of pakistan investment bond ( pib ) for tenures of five to ten years government paper and a burgeoning corporate bond market has begun to emerge bringing together long term institutional investors and borrowers interested in long term sources of financing. governance and institutions the cornerstone of the governance agenda is the devolution plan which transfers powers and responsibilities, including those related to social services from the federal and provincial governments to local levels. this plan was

benefits to about 700, 000 beneficiaries and their dependents. similarly, the workers welfare fund provides social security support to workers and their families. moving ahead despite the progress made during the last five years the challenges ahead remain daunting. to meet these challenges and the mdgs by 2015, pakistan remains committed to keep the momentum of structural reforms high, to maintain prudent macroeconomic management, to further reduce the debt ratios to keep the current account in balance to improve revenue performance without any relaxation of fiscal stance but to expand education and health services. the thrust of the monetary policy would be not to allow inflationary expectations to become entrenched while providing credit and liquidity to private sector. the efficiency of the energy sector will be enhanced by privatizing the distribution companies encouraging private investment in low cost generation projects and laying cross border gas pipeline. the efforts to attract foreign direct investment particularly export oriented industries and services will be stepped up by further improving the business climate and governance. the judicial framework will be strengthened to enforce property rights and contracts. investment in human capital to upgrade the quality of labor force and improve the opportunities of employment for the poor would remain a priority. the quality of institutions will be improved through reforms of civil service and law enforcement agencies. the current policy stance of an open trading regime with low tariffs and non - existent non - tariff barriers, a liberal foreign investment environment with no restrictions or prior approvals of any kind, a market - based financial sector working under competitive structure, a dynamic private sector producing goods and services with an enabling public sector providing infrastructure and social services will remain in place.