Prime Minister Yousaf Raza Gilani has said that extremism and terrorism as main challenges facing the country adding that Pakistan seeks negotiated and peaceful resolution of all disputes with India. General Ashfaq Pervaiz Kayani, Chief of the Army Staff, Maj. Gen. Khalid Rabbani, Commandant Staff College and members of Faculty officers were also present on the occasion. Prime Minister said that when PPP took over the reigns of the country, a major economic crisis was looming large while scarcity of essential food items had made the common man's life miserable. Terrorists were roaming around unchallenged while law enforcements agencies looked helpless. Political parties were disarrayed and public at large was terrified while there was no consensus and strategy to deal with such a menacing situation. Judicial crisis brought the whole legal community on the streets. Center-provincial, Inter-provincial as well as intra-provincial relations were estranged. Institutional wrangling brought the whole government machinery to a halt. International isolation was staring in the face. Our adversaries were complacently projecting Pakistan as a failed state. Even, the confidence of our friends had worn thin. All these issues of vital importance to the country required Government's immediate attention. He said besides addressing the momentous challenges at both external and internal fronts, the transition to the nascent democratic order also required careful and deft handling at the top, for any indiscretion could deal a blow to the system. However, the single most important issue that stared the democratic government in the face and warranted urgent policy response was that of terrorism and extremism. Yet resort to military action was not without its perils, PM said. He said There were two roads waiting to be trodden with their differentiating lines clearly drawn. The first path was politically expedient but the cost to the country and our future generations was incalculable. The second road appeared bumpy, full of risks but a journey on it could also lead to abiding survival of our nation. We were to choose between two options i.e. between progressive, tolerant and welfare Islamic state as envisioned by the Quaid-e-Azam Mohammad Ali Jinnah, our founding father; or a theocratic, intolerant and extremist state as desired by the extremists. We followed the Quaid-e-Azam's path. We made up our mind to safeguard the identity, values and ethos of our country and nation. "As a result of national consensus across political divide, our military successes in Swat, Malakand and South Waziristan have been acknowledged globally thanks to the sacrifices of the people of these areas and demonstration of bravery by our armed forces and security agencies. The instant response of the entire nation and the focused attention of the Government in looking after the 2.5 million IDPs and their safe return were unprecedented. Now, peace has been restored in Malakand and Swat, and the people have started their normal life", the PM said. The democratic government has been very clear in its vision that if federation were to be saved from dangers, it would have to win the strong support of the federating units by addressing the long-standing issues. He said upon taking over, the democratic government acknowledged the criticality of situation in Balochistan assuming power, the government tried its best to redress the grievances of Balochistan and in this regard a package was approved for the said province by the parliament. "Our government announced jobs for 20, 000 Baloch youths. One of the important decisions relates to the payment of royalty and gas development surcharge, which is Rs. 120 billion to be paid in 12 years; that means Rs. 10 billion every year", he said. He said The signing of the seventh consensual National Finance Commission Award between the Centre and provinces is a historic step in promoting inter-provincial harmony and strengthening the federation. The present vertical distribution of resources under the NFC meets the long-standing demand of provinces for financial autonomy. This year, provinces will get more than one trillion under the NFC Award. The passage of the historic 18th Constitutional Amendment through unanimous support of both the Houses of the Parliament represents a giant leap forward in that direction. The President's voluntary surrendering of his powers as the head of National Command Authority and also under the 18th Amendment to the Prime Minister and by extension to parliament shows our commitment towards strengthening parliamentary democracy in the country. The federation of Pakistan has become strong as provinces have been empowered both economically and administratively under this amendment, PM said. Beside past baggage of wrong policies, Pakistan's economy also suffered due to the global down turn, the security situation inside the country as well as in the neighborhood. In the face of 25% inflation rate and 1.2% annual growth rate---lowest in the three decades--, your Government took a number of hard yet sound decisions to shield the economy from global recession and put it back on the path of recovery, he said. However, due to wide-ranging reforms and economic belt-tightening introduced by our government, we have come full circle from a default-like situation to a reasonable stable economy. Moody's has recently placed Pakistan in a B3 sovereign rating with a stable outlook. The economic policies pursued by your government have brought about macroeconomic stabilization, narrowing the gap between fiscal and current account deficit. GDP growth has begun to turn upward reaching 4.1% in the outgoing year. Foreign exchange reserves surpassed US$ 16 billion. Remittances are up sharply to a record level of US$ 8.5 billion, he said. "Pakistan seeks negotiated and peaceful resolution of all disputes with India. My government believes that if the lives of people of South Asia were to be improved, peace is the only course to achieve this purpose. By suspending composite dialogue following the Mumbai attacks in November 2008, non-state actors succeeded in dictating their agenda" He said it is unfortunate that the leaderships of both India and Pakistan, who have immense stakes in the future, have been meeting on the sidelines of regional and multilateral forums instead of holding direct talks. Our consistent viewpoint has been to delink peace process from terrorism. The Indian leaderships' willingness to resume stalled dialogue and international support for initiation of talks represents a win of our diplomacy.