Which raises the obvious question of why inflation, interest rates, and even the exchange rate were relatively stable? The reason is because the economy was largely able to finance this demand from capital inflows from abroad, as can be seen in a growth of 1462 percent in foreign investments and 83 percent growth in Net Foreign Assets (NFA) of the banking system.
The situation looks totally different when we look at the period between June 2007 and November 2010. In response to growing demand pressures, SBP had started tightening its monetary policy stance and it did have an effect. Helped by a decline in international commodity prices, the trade deficit grew by only 18 percent during this period.