. more than 50 percent of the energy needs of the country are met from local reserves of natural gas and hydel power. pakistan was one of the few developing countries that achieved an impressive economic growth of 6 percent annually for over four decades and tripled its per capita income. incidence of poverty had declined from almost 50 percent of the population to less than 20 percent by the late eighties although it has resurged to 34 percent by the late nineties. an average pakistani today has higher life expectancy, enjoys higher food per capita and consumes more calories than his father ’ s generation. we have built large dams such as tarbela and mangla, motorways, super highways and modern ports. we are better connected to the rest of the world through fast means of telecommunications, internet, cable and satellite channels. despite these spectacular achievements for which we should thank almighty allah for his blessings we are still a poor and underdeveloped country and the benefits of this progress have not been shared universally. too many people have been left out : one - third of the population still lives on about rs. 60 per day, one - half of the population is illiterate with extremely low female literacy rates in the rural areas, a large segment of population does not have access to safe water for drinking and personal hygiene ; disease, malnutrition, infant and maternal mortality rates are still quite high, population is growing more rapidly than other countries in the region and income and regional inequalities are rising. in essence, we have lagged behind in our social and human development indicators and our performance has been much below our potential. this lack of social progress has also created problem of social cohesion. this therefore, brings me to a series of questions : how can we catch up with the rest of the world and start improving on our social and human development indicators? what can we learn from our own historical experience and the mistakes we have made in the last? what can we extract from the success stories of other developing countries and apply them to pakistan? although there is always a lack of unanimity among economists about the prescriptive aspects of development let me venture to share my own thoughts with you today. the last five decades of development experience have taught us clearly that the respectively roles of the government and private sector should be clearly delineated, defined and put into practice. those who think in terms of dichotomy between market and government are sadly mistaken. government has

good, nor evil. but they remain very powerful tools that distribute bis central bankers ’ speeches goods and services across the economy. regulation is necessary because it gives markets a direction, and can govern them with a set of values, which markets do not possess innately. less, but more effective regulation is the need of the hour for our own economy too. it ’ s an essential part of what is needed today to get the economy on a track for steady and sustainable growth. the government ’ s footprint in some sectors of the economy is very large, and quite negligible in other sectors. such divergence is unhealthy. for instance, the government has a very large presence in our agriculture and energy markets. those sectors are, in some ways, over - regulated. too much regulation and red tape can breed incentives for the abuse of power, mismanagement and corruption. it also acts as a disincentive for the private sector. and we must remember here that it is always the private sector that functions as the engine of the economy. however, effective regulation is sorely lacking in other sectors. the tax machinery can be tightened considerably. one of the country ’ s most challenging problems today is the size of the fiscal deficit – and a large part of the solution lies in increasing our tax base by enacting regulation that encourages tax compliance, and punishes tax evasion. the link between better tax collection and faster economic growth deserves to be flushed out here. better tax collection means that the government has to depend less on foreign support for its budgetary needs, and can decrease its fiscal deficit. more importantly, the government will not have to borrow as much from the domestic banking system to finance itself. less borrowing from commercial banks will encourage market rates to fall and banks will lend more to the private sector. as investment picks up, the growth potential of the economy increases. similarly, the government will need to borrow less money from the central bank as well. borrowing from the central bank is popularly known as printing money. this is inflationary, and i don ’ t think i need to introduce you to the problems associated with high levels of inflation. if government borrowing from the central bank falls, inflation will follow suit. therefore, better tax collection is a necessary condition for faster economic growth. and for that we need to have more effective tax regulation. another problem that we desperately need to fix is our energy problem. it ’ s something that has been affecting every citizen of the