Financial Market Reform in Pakistan

The paper argues that the finance diménsion of economic development has often been treated as an afterthought by researchers and politicians alike, because it is considered to be too "sophisticated" to matter for "simple" economies. The role of the financial sector was considered to be primarily for mobilising resources to increase growth. However, experience has also revealed that financial development, including stock market development, is correlated with current and future economic growth, capital accumulation, and productivity improvements. It is suggested that a strategy for financial market development in emerging economies is better evolved from the perspective of the "functions" of financial markets as envisaged in modern financial literature. It is also argued that financial sector policies in emerging economies should focus on enhancing, rather than inhibiting, the multiple roles of financial markets.