The State Bank of Pakistan has kept its base rate steady at 12 percent in its latest review of monetary policy, though it makes a gesture towards the national and provincial budgets, coming in this period, calling on the government to rein in its deficit, and increase its revenue collection so as to improve the tax-to-GDP ratio. This may have caused it to err on the side of caution, so it has maintained the base rate, instead of cutting it to stimulate the economy, as it badly needs. But since it was budget time, the State Bank was not going to risk making money more expensive, not with the government scheduling itself to be a major borrower in the coming financial year. One of the main expenses the government bears is for the war on terror, for which it had originally budgeted Rs 185 billion, after spending Rs 154 billion this year against a budgeting of Rs 125 billion, though budgetary constraints are forcing budget makers to propose only Rs 120 billion. This is only the direct cost. The budget also suffers because the collapse of business which the war has caused has not just caused a reduction in direct and indirect taxes, but also led to the reduction in foreign direct investment that the State Bank finds so worrying. Already, the Federal Board of Revenue is facing the uphill task of collecting Rs 280 billion in the remaining five weeks of the financial year if it is to meet its target of Rs 1380 billion this year. Though the Board has adduced a number of reasons for its failure to meet its target, it has avoided mentioning the most important reason, the war on terror. This being in a state of denial means that the State Bank, despite its wealth of expertise, is no longer a good adviser to the government. The State Bank continues to act as a pawn for the IMF, which continues to prescribe policies for the government, as witnessed in the current budget. Its hold over the State Bank can be seen from the way its tax ratio mantra is being echoed, even though the exemptions for agriculture and speculation have been restored by the government silently. The IMF must be told that its policy prescriptions will not be followed, and the consequent abandoning of the war on terror, while sure to anger the Americans, will please the people, which should be pleasing to a democratic government, provided it has no other reasons to please the Americans, like the vain hope they can somehow guarantee the survival of the government. Apart from the measures that will be announced in the budget, the State Bank must lower its base rate, so that interest rates come down, and the economy receives the stimulus it needs.