financial sector as dominant players in money and foreign exchange markets, the capital market has yet to develop and still requires nurturing to reach its true potential. even within capital market, the corporate debt market is truly at nascent stage. while equity markets typically tend to develop earlier than the debt markets in most developing countries, pakistan ’ s economy and financial sector are now at a stage where they can support and benefit from a vibrant and efficient debt market. the size of private debt, or term finance certificates ( tfcs ) in pakistan, remained around rs. 74 billion ( 0. 5 % of gdp ) which is paltry compared to the outstanding domestic government debt of pkr 4. 64 trillion ( 31. 4 % of gdp ). there is clearly underexploited capacity available to support economic growth. banks continue to be the main provider of debt in the system. in the absence of an active capital markets, the commercial entities fail to procure long term debt financing, and rely on short and medium term loans from banks. consequently banks carry sizable maturity mismatches on their balance sheets as they fund their advances through short term deposits. since banks tend to lend to only larger borrowers, their portfolio is highly skewed towards large sized loan. in recent years, with rising npls, and increased borrowing by the government, the growth in private sector credit has become stagnant. banks are trying to limit their credit risk and it has become more challenging to raise private debt for a business. while some credit uptake may take place in the future, it is unlikely that banks will be keen to finance new long term projects anytime soon. there is a need for coordinated efforts and support of the government as well as of regulators ( sbp & secp ) and banks for the development of a fixed income market that is necessary to diversify the financial sector which in turn would enhance its role in supporting economic growth. future priorities for the banking sector the future is obviously not isolated from the progress made so far. we have unambiguously designated our future path that includes three main priorities ( a ) to make our banking sector more resilient against exogenous shocks through our macro ( systemic ) and micro prudential framework, ( b ) actively encourage technological solutions for financial access and an efficient payment system, and ( c ) address the development needs of the financial markets and broaden the array of product and services as well as outreach. we would like to see our banks

the policy making and implementation have created a lot of confusion, waste of efforts and inadequate outcomes. there are too many players moving in different directions. there is a need for clear definition and delineation of responsibilities between the various tiers of the government and accountability of results. at the same time there are areas such as regulation of private institutions in education and health that are begging for action by the government and there is nobody in charge. these gaps, ambiguities and lack of defined responsibilities have given rise to weak governance in this sector. second, at each tier of government there is a bundling of policy, executing and regulatory functions within the education and health ministries and departments. this concentration of powers impairs the capacity of the departments to deliver the services. there is an urgent need to entrust the policy making functions to the ministries and departments, executing and implementing responsibilities to fully empowered agencies and the regulatory duties to independent regulatory bodies located outside the ministries and departments. this unbundling of functions will help strengthen the capacity of government to deliver these social services in an effective manner. third, the management of education, health and other human development policies, programmes and projects is far from being satisfactory. we assume that technical experts and specialists in their areas, such as education and health, can fit in very easily in the managerial positions. little do we realize that all successful institutions in the world have properly trained and experienced hospital administrators, educational administrators, financial managers, supply chain and logistics specialists. on the other hand, here in pakistan we have unqualified and inexperienced persons aspiring and competing for these positions simply because they carry privileges, perks and power. why should highly qualified surgeons fight with each other to become medical superintendents or hospital administrators? administrative positions carry a lot of prestige and power which the professional positions do not and hence we have serious misallocation of resources. we lose first rate surgeons and doctors end - up with third rate administrators who rely upon the office clerks, superintendents and accountants for advice and decision making. no wonder we have such an awful record on delivery of services. fourth, there is too much bureaucratic strangulation in the business processes and at the same time too little accountability. the plethora of rules, regulations, reports etc. stifle initiative and innovation and encourage apathy and inaction among those who wish to play by the book. but those who are dare devils use the opaqueness of the same rules and regulations and diffused nature of