. how can the perceptions of these two groups be ever reconciled or would they continue to differ? no government – civilian or military – can afford to ignore the genuine aspirations of its domestic constituents. but there is a transition period before which the new goal of shared and equitable growth can be achieved. in a society where sifarish, connections and exchange of favors have propelled the governance of the country for such long time it is very difficult to change the mind set or the prevailing value system. equally difficult is to convince that any ruling class can take decisions which are not based on their personal interests. for the next three to five years, pakistan has to stay the course, continue on the reform path it has set for itself steadfastly and bring about fundamental structural changes in our governance and institutional structure. this hard struggle is the only sure way to reduce our vulnerabilities and dependence on the imf. why can ’ t this be done now or earlier? because the resource generation capacity of the economy is still and will remain below the debt servicing obligations for several years. once we have attained the stage where our fiscal and external accounts are no longer in such a state of chronic imbalances as they are today we will be able to attain our economic sovereignty. this will provide the government ample fiscal space for increasing development expenditures, expanding infrastructure facilities and thus enabling the private sector to reduce its cost of production and distribution, and most importantly allow public sector to invest in technology, skill development, training and other aspects of high level manpower upgradation which will help our competitiveness in global market place. at the same time, the rules of game for the private sector have to be changed where privileges, protection and pampering of a chosen few should give way to a level playing field for all where work ethic, enterprising behavior and productivity enhancement are rewarded. the community and non - government organizations should also engage along with the local governments in promoting primary education, basic health services, potable water supply and sanitation to the vast majority of the population. this public - private - community partnership will lead pakistan into the era of self - reliance, economic growth and social stability and poverty alleviation. there are those who argue that alternative solutions which gives primacy to growth should have been adopted. as an economist i am not quite sure as to how this can be done on a sustainable basis. economic management involves trade offs and choices among various competing demands. government can, of course, in

financial markets. as a result, asset prices of all kinds have been volatile. so far the consequences of turbulence in financial markets have been largely restricted to securities markets, especially in the united states. these markets are somewhat less important in the provision of corporate finance in the uk, although if the reduction in security market issuance were to persist this could affect the ability of the personal and corporate sectors to obtain finance from both banks and the capital market. as yet lending by uk banks has not been affected to any significant extent. the monetary statistics published yesterday show that total bank credit grew by 0. 7 % in september, leaving the 12 - month growth unchanged at 8. 7 %. the mpc will watch carefully for any signs of a credit crunch developing. the bank monitors indicators of credit conditions in the financial markets on a daily basis. and the mpc has asked the bank ’ s regional agents to conduct a survey of borrowing conditions faced by businesses around the country in time for the mpc meeting in november. the international situation is, of course, only one of the factors that influence interest rates. in the august inflation report, the mpc made clear that it expected - indeed wanted - the growth of domestic demand to continue to slow throughout this year and into next. a slowdown is necessary because, as the restraining effects on retail prices from the rise in sterling start to wear off, domestically generated inflation must fall if the inflation target is to be met. the latest data from the office for national statistics show that domestic demand and output have been growing broadly in line with the desired path. but survey data show a markedly weaker picture for output and orders, both over recent months and, more importantly, looking ahead. the lags with which changes in monetary policy affect the economy mean that the mpc can not wait to find out whether the surveys provide an accurate prediction before it sets policy. each month the mpc balances the information contained in official statistics, surveys, anecdote and the impressions of conditions in industry relayed to us by our network of regional agents. an issue of considerable importance is the state of the labour market. the august inflation report argued that the outlook for inflation depended critically upon the labour market and, in particular, on the behaviour of earnings. at the time of that report the latest figure for earnings growth was 5. 4 %. given historical levels of productivity growth of around 2 %, this level of earnings growth was, on the face of it, incompatible in the