Mobilization of domestic saving for economic development may
be attempted by alternative methods, namely, through taxation and public
revenue surplus, through higher incentives to savers and financial
intermediation, and through income redistribution in favour of sectors
which are provided high incentives to save and invest. In view of the
lack of an active financial sector, fiscal weaknesses and other market
imperfections, Pakistan primarily depended on the last strategy to
mobilize domestic saving. This paper elucidates the mechanics of this
strategy and some of its effects on sectoral resource transfer,
aggregate savings, financial intermediation and resource
allocation.