In its report for the second quarter of the current fiscal year, for October-December 2011, the State Bank of Pakistan has predicted that the economy would grow 2 to 4 percent. This is anaemic considering the historic highs of 6 percent, but higher than the 2.4 percent growth of the previous fiscal year, 2010-1. However, there is the SBP caveat that the government deficit also makes the target of containing it to 4.7 percent of the GDP seem challenging. The SBP report noted that this government deficit had inflationary consequences, and that the burden of financing this deficit would fall on the banking system. This would crowd out lending to the private sector, and thus block the economic growth that is needed for the economic well-being of coming generations. The report also disclosed that the current account deficit was widening. This was part of the problem with the overall government deficit, as achievement of the revised deficit depended on the realization of the envisaged surpluses from the provincial governments. This is likely to be lower than expected; and non-tax revenues, which depend on inflows into the Coalition Support Fund, the auction of 3G licences; and strict control over expenditures. While the Fund inflows are a matter for foreign policy, and the auction is essentially a technical matter, the reduction of government expenditure is something the government does control. However, while it has entered the last year of its existence before the next general election, it has not given up those free-spending ways which look on taxpayer’s money as meant to support the luxurious lifestyles of the government’s members. The government must notice that the report has evoked the reaction that it has shown up the government. The report comes at the same time as NEPRA has called for a huge increase in the name of fuel surcharge. Whether or not this is justified is debatable, but it cannot be debated that this will press the ordinary citizen even harder. This makes the report yet another argument for the building of the Kalabagh Dam. One of the main mainstays for meeting the current account deficit, which was worsened in the second quarter by the need to repay the IMF, according to the report, would be the foreign exchange reserves. The pressure on the reserves meant that the rupee would lose value, which again meant inflation. The government should realise that controlling expenditures will not only directly contribute to ending the deficit, but would also set an example. Also, saving is perhaps the only practical step that it can take. This is quite apart from the generally correct behaviour indicated by a reduction in expenditure, and a careful stewardship of the taxpayers money. The government should pay careful attention, especially when facing an impending general election, to what the SBP is saying.