A notable development in recent years in Pakistan's economic scene has been the sharp pickup in the rate of inflation. In particular, Pakistan has experienced sustained intlation (changes in the CPI) hovering between 11.0 to 13.0 percent range during the last three years (1993-94 to 1995-96). The persistence of inflation at double-digit rates over the three successive years has attracted considerable attention of academics and policy-makers. Not surprisingly, one of the thorniest issues in Pakistan's policy arena today is how to put inflation under effective control.Recent studies on inflation in Pakistan I broadly agree on the key factors influencing the rate of inflation, namely, the growth in money supply, the supply side bottlenecks, the adjustment in government-administered prices, the imported inflation (exchange rate adjustment), escalations in indirect taxes, and inflationary expectations. However, these studies do not concur on the relative importance of each of these factors as determinants of inflation. While Nasim (1995) and Hossain (1990) find money supply as the principal factors underlying the rising inflation rate in Pakistan, others suggest that food prices followed by government administered fueVenergy prices and indirect taxation are the primary impetus for the upward inflationary spira1.2 In fact, Naqvi et al. (1994); Hasan et at. (1995) and Bilquees (1988) accord relatively less importance to money supply as a factor influencing the rate of inflation but in no way recommend a relatively easy monetary policy.

Without generating high growth rates of national income, a country cannot make a sustained attack on poverty, unemployment, and other economic problems. Developing countries have, generally, pursued the goal of rapid economic growth with the help of industrialisation. In this regard, an optimal structure of the industries enables a country to experience 'sustainable' economic growth. Countries adopt various trade strategies to allocate resources to their optimal use in order to exploit their industrial potential. Developing countries, including Pakistan, have adopted the import -substituting (IS) trade strategy to foster industrialisation.1 But the disillusionment with the IS strategy and its results is increasing over time. Contributing to this trend is the remarkable increases in growth rates by many countries that have shifted to an export-promoting (EP) trade strategy. At the same time came a fundamental question of the adequacy of economic growth itself. That is to what extent the economic growth under the IS strategy has given rise to the unfavourable results with respect to employment, capital accumulation, and income distribution. Analysis of these effects presents a tall order and we do not go that far in their evaluation. In this study we restrict ourselves to the question how various trade regimes are related with savings. The nature of this relation is somewhat complex.