Pakistan has faced a seismic shift inits global and domestic economic landscape which untilrecently limited policy options to address investmentclimate concerns. External shocks, internal policy inactionand political turmoil placed the country in a precariouseconomic condition, calling on the authorities to take ahard look at the policy choices ahead. Macroeconomicinstability resulting in inflation, exchange ratedepreciation, and a rapid depletion in foreign reservesbecame acute in 2007-08, with the adjustment accompanied bya reduction in investment, export and output growth. Therecent slowdown in global demand for world trade along withsupply shocks from the domestic economy has exacerbated analready monumental challenge for Pakistani firms to prosperand policy makers to respond. As external market conditionsand Pakistan's own stabilization program tempereconomic expectations, opportunities abound to lay thefoundation for expansion. Given Pakistan's geopoliticalpositioning, growing labor participation rates, andimprovements in the standard of living, significant povertyoutcomes can be achieved through sustained economic growth.Even, in the short run, during periods of slower growth,banking system weakness, and corporate distress, Pakistancan take the opportunity to position itself for theinevitable global rebound. Concerted efforts now can improvefirm level productivity, fluidity of markets for labor,capital and land, as well as goods, and therefore, betterresource use and global competitiveness.
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