confident that the future direction of economic policy making will be guided by the following principles although in a dynamic and ever changing world, economic management will have to be responsive to the needs of the time and events. i. outward - looking strategy that promotes exports and integrates pakistan into the world economy is in the best interest of the country for accelerating growth and reducing poverty. tariff reductions have been quite drastic from 220 percent to current maximum of 25 percent helping the businesses to become cost competitive. anti - export bias has been significantly removed and export promotion is the stated policy objective. ii. private sector is the main vehicle for producing and exchanging goods and services for the domestic economy as well as the rest of the world. prices should be determined by the market forces but monopolies regulated by independent agencies. iii. the role of the state is to provide security of life and property, have an independent judiciary that can arbitrate disputes and enforce contracts, build physical infrastructure, nurture human skills and train manpower and maintain an enabling macroeconomic and regulatory environment in which businesses can flourish. iv. public sector enterprises and government trading houses should be privatized through a transparent process so that the government can focus its attention on its basic responsibilities to the citizens. selling these enterprises to private entrepreneurs has stopped the hemorrhaging of government finances. v. pakistan will continue to have a liberal foreign exchange and low tariff regime without recourse to any non - tariff barriers. raw materials, components, machinery and equipment, consumer goods can enter the country free of restrictions. foreign investors are free to bring in and repatriate capital, dividends, profits, remittances, royalties, etc. without any approvals. vi. the value of pakistani currency in relation to other foreign currencies will be determined through supply and demand in the foreign exchange markets and not by administrative fiat of the central bank. a freefloating exchange rate policy is being pursued at present and will continue in the future. vii. the central bank or the government no longer controls interest rates on government securities, corporate borrowing, deposits, etc. they are totally deregulated and the banks are free to charge the spreads according to risk assessment of the borrowers. there are no priority sectors to which credit is directed. government is not allowed to borrow from the banking system beyond a specified limit. viii. foreign companies, individuals, multinational corporations can own 100 percent shares in locally incorporated or unincorporated firms. they can raise equity through

liquid asset buffers than our requirements, which is perfectly acceptable as a choice. access to bank of england liquidity facilities, which is an important form of insurance, has increased in terms of the number of societies having reserve accounts and preparing for the use of lending facilities should that be needed at some point in the future. unsurprisingly, therefore, the overall position on ratings for those societies that have them has improved. so, it ’ s true, harrogate really is the happiest place in england. of course, i am now going to go on to talk about risks, but before i do let me say that this sort of performance doesn ’ t happen by accident. but it does show that there is a role for mutuals and one that can succeed. of course, a lot of hard work goes into achieving these results. on our side, i can also say that martin stewart and his colleagues put a lot of hard work into our role, which is founded on sensible forward - looking judgement consistent with our objectives in statute. so, what can go wrong – the risks? the first area that i would highlight is the potential for margin pressure. most forecasters see continued growth in the mortgage market as the most likely development, but at a lesser pace than in recent years, which is consistent with actions taken by the bank of england last summer to limit the growth of borrowing by highly indebted households. competition in the mortgage market is growing, and for instance rates on two year fixed rate mortgages are at a record low. on the liability side, wholesale funding costs are low, and on much of the evidence they are below retail funding costs on average, and that tends to benefit lenders with greater access to wholesale funding. therefore, bis central bankers ’ speeches notwithstanding the news on interest margins over the last two years, we are watching this story carefully to see what happens next. the second risk unfortunately follows from the first, namely that increasing pressure on interest margins can tempt lenders to seek higher returns on assets through riskier loans, and to concentrate more on short - term funding thereby increasing the mismatch. we saw this before the financial crisis broke in 2007 as lenders ventured into higher ltv, sub - prime and commercial property lending without having adequate risk management in place. we also saw this in the late 1980s and early 1990s. this diversification was generally not successful, and in some cases fatal. since the height of the crisis societies have