Speaking at the inaugural session on Tuesday of the Development Finance Conference on “Expanding Frontiers of Financial Access in Pakistan”, organised by the State Bank to mark its 60th anniversary, the prime minister said during the outgoing financial year, many external and internal shocks, coupled with inaction had severely impacted on the economy. “The government excessively borrowed from the SBP and demands of the foreign exchange market took a toll on our reserves.”

Prime Minister Gilani spoke on the medium-term agenda of economic reforms and development and said it was a desire of the PPP-led government to maintain the growth momentum in the range of 6-7 per cent over the next five years. “Economic liberalisation, deregulation and privatisation in a transparent manner will be core principles of our economic reform agenda.”

He stressed the need for a balance and coordination between monetary and fiscal authorities. He believed that high growth in macro-economic imbalance was indicative of the fact that the country was living beyond means.

He said the government was committed to bringing down fiscal deficit to 4.7pc of GDP during the fiscal year 2008-09 from the present seven per cent.

“We are aiming to contain fiscal deficit in the range of three to 3.5pc of GDP in the medium-term and intend to keep the economic growth between six and seven per cent during the next five years. Our focus will be on quality of growth in agriculture, manufacturing and services sectors. Tackling energy crisis and overhauling tax policy and tax administration will be key policy objectives,” he said.

Mr Gilani pointed out that the private sector was an engine of growth and source of generating employment and said his government would take steps for creating an appropriate atmosphere in this regard because it was not the government`s business to run business.

Referring to the end of subsidies, he said it was required to remain within the budget deficit of 4.7pc. The reorientation was primarily to provide a targeted subsidy to poor. Over 40pc of the fiscal deficit was on account of subsidy bill, he added.

Mr Gilani praised the SBP for setting up a “holistic development finance group” to broaden financial access and meet requirements of economy, infrastructure, industry and population at large. “The provision of banking services to under-served segments of society will directly help and reinforce measures being taken by the government,”

The prime minister said that with SBP`s support, commercial banks had managed to promote delivery of agricultural credit which was likely to reach an all-time high of Rs200 billion and facilitate about two million borrowers, of whom 75pc were small borrowers.