KARACHI- The slow growth in economy, rising inflation and revenue enhancing measures (particularly taxes) by the Government of Pakistan hit the telecom sector growth adversely during the first half of the fiscal year 2008-09. The first half of fiscal year 2008-09 witnessed a slow growth in Pakistans economy coupled with hyper inflation, acute power shortages, a slowdown in the manufacturing and services sectors, a sharp increase in interest rates and widening current account deficit. Pakistan Telecommunication Authority has pointed out this in its quarterly report for October-December 2008. Report said the development indicators of the sector i.e., subscribers, teledensity and revenue continued to show declining trend during Jul-Dec, 2008. Total teledensity was increasing more than 7pc per quarter since July 2007. However, its rate of growth declined in last quarter of fiscal year 2007-08 where its quarterly growth was registered only 2.2pc during Oct-Dec 2008. Owing to the above factors, it is expected that GDP growth for fiscal years 2008-09 will be around 2.5pc. The inflation rate as measured by the changes in Consumer Price Index (CPI) stood at 24.4 t per cent during the period Jul-Dec 2008 as against 8.0 per cent in the comparable period last year. The food inflation is estimated at 31.2 per cent and non-food 19.2 per cent, against 11.6 per cent and 5.4 per cent in the corresponding period of last year. To cope up with the situation, State Bank of Pakistan adopted tight monetary policy where policy rate was adjusted upward to control on aggregate demand in the economy. Total teledensity of the country counted 59.6pc at the end of December 2008 which was 59.89pc at the end of Sept 2008. This decline is mainly attributed to cellular mobile sector whose contribution in teledensity is more than 93pc. Though fixed line teledensity continued to decline in last few years however this gap was being filled by cellular mobile sector. It has been argued that decline in fixed line teledensity would be compensated through Wireless Local Loop (WLL) segment. However, the WLL growth pace is slow which is unable to fill the gap. Telecom regulator is continuously watching these negative trends and making its utmost efforts to provide relief to operators in terms of taxes and other charges to improve the situation. The stable economy, consistency in policies, stable financial environment and strong economic fundamentals such as low inflation and low fiscal deficit and freedom to investors to repatriate their profits are considered prerequisite to attract foreign investment in any country of the world. Despite a slow down in economy as well as of telecom sector, Foreign Direct Investment in telecom sector of Pakistan continued in last few years which indicates the confidence of foreign investors in their policies, as during the last 6 months (Jul- Dec, 2008) telecom sector received over $ 716m FDI inflows which becomes 31 pc of total FDI landed in Pakistan during this period.