For the last three years, Pakistan hasbeen making efforts to revive strong and sustained growth.The economy was badly destabilized by the turmoil in theinternational commodity and financial markets in 2007-2008and the lack of adequate domestic policy responses to managethose external shocks. The task of stabilizing the economyand reviving the economic recovery has been made difficultby an adverse security situation and domestic politics thathas prevented the government from taking timely required,but difficult, stabilization measures. The devastatingfloods in July-August last year and the recent increase ininternational oil and food prices have exacerbated theproblem. In addition, Pakistan continues to face significantpolitical challenges in achieving durable development. Thedomestic security situation as a result of campaign againstterrorism is a direct and indirect tax on the costs ofeconomic activity and the achievement of the kinds of socialstability required to promote a supportive environment for businesses.