retirement funding and insurance has grown • the phenomenal growth in financial markets and cross border flows • the ability of the financial industry to take advantage of the opportunities provided by the lending and mortgage markets, and development of credit risk transfer instruments which involve structuring and trading of credit derivatives and asset backed securities that allows risk inherent in a loan to be repackaged into two or three tradable components to offer optimal allocation of risks – this is particularly relevant in the context of developing financial markets where the risk profiles of banks are still dominated by credit risk predominantly of the issuance of loans even though there are moves towards corporate bonds or transactions in over - thecounter markets, which involve the risk of a counterparty defaulting. • adoption and adaptation of technological advancements in communication and information technology that has seen the explosion of financial innovation with service providers now offering multiple and diverse solutions that enhance efficiency and reach of products across boundaries and across national jurisdictions. • need to globally integrate financial systems and encourage end - to - end straight through processing capabilities and development of payment, clearing and settlement systems to overcome time zone and currency constraints. • with globalization of markets & businesses, there is greater need for global transaction solutions for effective cash management, trade finance, trust & securities services, and continuous linked settlement. • finally, there are now mounting regulatory pressures to seeking greater it solutions to tracking money laundering as well as adopting the new risk management framework including basle ii. role of the central bank recognizing that pakistan ’ s banking industry subsequent to its restructuring is now positioned to move to the next level of development, sbp has been focusing on promoting gradual migration from a predominantly cash and paper - based system to electronic payments. this has involved on one hand development of the real time gross settlement ( rtgs ) system, awareness creation and information dissemination about the role, importance and issues of payment systems and protection of consumer interests. on the other hand, it has involved encouraging banks to invest in technology and improve their payment and settlement system infrastructure, internal controls and move to e - banking. clearing and settlement systems in pakistan as a custodian of the payment system of the country, sbp has nurtured and supervised the operation of the clearing house for the member banks operating within its jurisdiction. automated clearing services are now provided by national institutional facilitation technologies ( nift ) under the supervision of sbp in nine major cities of pakistan. a complete range of conventional clearing services including overnight clearing, same day

ishrat husain : effectiveness of policies and reforms - a country perspective remarks by mr ishrat husain, governor of the state bank of pakistan, at the world bank oed conference on effectiveness of policies and reforms, washington dc, 4 october 2004. * * * the oed has done all of us a great service by carrying out evaluations of bank country programmes in a systematic manner using a common framework. the findings of these studies should be of value not only to the bank ’ s own operational staff but also to the economic managers of the client countries. as someone who has had the good fortune of working on both sides of the table, i would like to share some of my thoughts with you on the findings of these studies. first, let me begin by saying that i find myself in agreement with some of the conclusions of this report and there are at least three such broad areas : ( a ) i believe, just like the oed report, that aid is neither necessary nor sufficient for good policy. aid can complement and catalyze the political and administrative processes by fostering and reinforcing the development of ownership but aid per se is no substitute for ownership. ( b ) i also think that conditionality per se is ineffective in linking aid with reform because the incentive structure makes it difficult for donors to disengage when conditions are not met. the donors should avoid micromanagement and focus on results. ( c ) i am more emphatic, than the oed is, on the relationship between policy reform and growth. there is strong empirical evidence at country level ( not clearly sorted out in cross - country regressions ) that this relationship is indeed robust. the experience of pakistan since 2000 exemplifies that prudent fiscal balances, appropriate exchange rate, open trade regime, etc. do lead towards good growth outcomes and absence of these policies in the 1990s had decelerated growth and raised poverty level. having agreed with these broad findings let me elaborate on some other nuances and lessons which should be taken seriously at the time of formulation of policy reforms. ( i ) policy reform process is not always linear and we should expect slippages, setbacks and reversals during implementation. this should not throw donors off and they decide to disengage, withdraw or reduce planned assistance. the donors should stay on the course if the long - term direction, framework for action and overall strategy pursued by the country is clearly defined, followed