OUR STAFF REPORTER ISLAMABAD - Planning Commission Deputy Chairman Dr Nadeem Ul Haq on Thursday emphasised the importance of understanding the implications of financial crisis for the sustained economic growth. This he said while chairing the Quaid-i-Azam lecture on the third day of the 27th Annual General Meeting (AGM) and Conference of the Pakistan Society of Development Economists (PSDE). In Pakistans context, he said that though the underdeveloped financial system has made it immune to the international financial crises but at the same time it is not conducive for its long-term economic growth. Earlier, while delivering the distinguished lecture, Prof Atif Mian of the University of California at Berkeley, USA, said that the great recession, which started in the US, has to offer important lessons. This recession was triggered by massive accumulation of debt on the US household balance sheet. The US households borrowed more and more for every dollar of income, which increased dramatically from 2000-2001. He pointed out that this was not accompanied with high growth. Prof Mian argued that when credit comes into an economy it creates two different affects. On the one hand, when it comes into geographical regions where more houses are built, the housing prices do not increase a lot while on the other hand, in areas where more houses cannot be built, it shows up in increasing housing prices. When housing prices increase, the households borrow more against value of their houses, which creates bubble. And one important consequence of which is that the first people to default are the ones who were last to borrow because they had little income. Consequently, the net worth of the US households started to decline. The macro impact of this situation is that aggregate demand decreases and employment to population ratio declines, which has social and political consequences. Prof Mian, chalking out the lessons that can be learnt from the financial crisis, said that one first lesson that we can learn from this is that debt matters and it should be given priority in theory formulation. When you have debt it translates into huge distributional shock as well, but nothing happens to that lending class. The way around this problem is to reverse the distributional shock, which is difficult due to political reasons. Therefore, financial contracts should be reformed ex ante, he concluded. A panel discussion on a very important theme of Entrepreneurship was also held on the third day of the conference. The discussion was chaired by Dr Rashid Amjad, Vice Chancellor, PIDE. The panelists included Azam Chaudhary, Dean, Lahore School of Economics, Lahore; Zafar Mueen Nasir, Dean, Business Studies and Chief of Research, PIDE, Islamabad; Thomas Morris, Chief Economist, USAID, Islamabad; Shoaib Z. Malik, Director, Kausar Group of Companies, and Omer Saeed, Chief Executive, Service Industries Limited, Lahore. The panelists tipped entrepreneurship as key to private sector development and economic growth in Pakistan. They addressed issues such as factors hindering entrepreneurship in Pakistan and how it can be promoted.