large - scale industry which has met domestic requirements and has generated an exportable surplus which facilitated almost doubling of the exports to $ 16. 5 billion in fy06 relative to $ 7 - 8 billion in the preceding decade. normally real sector development precedes the development of the financial sector, but strong credit growth in the wake of a low interest rate environment in the last few years helped pakistan stimulate economic activity. consistent and stable economic policies enhanced business confidence. in the absence of alternative sources of funding, businesses relied heavily on banks to finance their needs. growth in advances coupled with gradually rising interest rates has provided a unique opportunity for banks to generate unprecedented profits and redeployment of these funds in the banking and economic system has helped strengthen banks ’ balance sheets and continue to meet the growing economic requirements, respectively. after having achieved high economic growth, the key question posed to the pakistani economic - policy makers is how sustainable is this high economic growth path? some even contest that the economy is showing signs of overheating. this debate is triggered by few emerging trends which are typically observed when economies are set to achieve new heights of growth. economic sustainability is being questioned on the grounds that : ( i ) pakistan ’ s growth has been primarily driven by growth in real consumption expenditure – this is partly true but is also a manifestation of rising per capita income that in fy06 is around $ 850, and higher remittances inflows that have now reached close to $ 4. 1 billion. ( ii ) after a consistent reduction in macroeconomic imbalances over fy00 - 04, the fiscal and external current account deficits have been above the targeted levels for fy06 and are likely to remain in that range in fy07. most notable is the concern regarding trade deficit which is around $ 8. 2 billion in fy06. 1 around 45 % of the increase in trade deficit for july - may fy06 over the comparable period in the preceding year is on account of the rise in import bill for crude oil and petroleum products, 39 % due to higher imports of machinery, 11 % because of iron and steel and 14. 3 % for food and fertilizers. ( iii ) government is offering a renewed and aggressive fiscal stimulus in fy07, but as is well known, pakistan has no choice but to accelerate social and infrastructure development and offer relief to certain segments of population and businesses to sustain its economic achievements

on the different developments in labour productivity growth in the euro area and the us. in particular, it helps identify those sectors in the euro area where the short - run link between strong employment and low productivity growth was particularly marked. recent economic studies have highlighted the role of the information and communication technology ( ict ) revolution in explaining the acceleration of productivity growth in the us in the mid - 1990s. 7 economic history has shown that great inventions have been the catalyst for long periods of rapid growth. think of the steam engine in the late 18th century, of electricity in the late 19th century or of the internal combustion engine developed by gottlieb daimler in the 1880s. similarly we are currently experiencing the ict revolution. the cost of computing and of communicating information has dramatically fallen down. we are by way of consequence the witnesses of an extremely profound change of the economy in the domain of the production of goods as well as services. the full body of the civil society is itself dramatically transformed by pcs and by the internet which is rapidly meshing cultures, spreading news and information to all corners of the world. this suggests that, for our economic analysis, we should distinguish between sectors according to their intensity of use of ict. a typical breakdown is between ict - producing, ict - using, and other industries which are labelled as ‘ non - ict ’. 8 once more, it will be interesting to compare developments in the euro area with those in the us. there may be good reasons to believe that the ict revolution started to materialize in the us, but as for the euro area, and despite all the computers around us, growth statistics does not show evidence of it to the same extent. in europe the solow ’ s paradox is still present when it has vanished in the usa. following this ict taxonomy, the main features of sectoral productivity contributions can be summarised as follows. first, a significant deceleration in hourly labour productivity in non - ict sectors from the early 1990s explains most of the decline in euro area aggregate labour productivity growth. the deceleration in labour productivity in the non - ict sectors seems primarily related to strong employment growth, which reduced the pace of capital deepening. second, productivity developments in the ict - producing sectors were relatively strong in the euro area in recent years, and even slightly outperformed the us in the segment of ict - producing services ( software, computer and communication services ). the contribution to labour productivity growth of the ict - producing sectors was 0.