The State Bank of Pakistans Annual Report for 2009-10 was not so much awaited because of its news about that year, as for its projections for 2010-2011. This is because of the floods, which are not really covered in the reporting period, but which the State Bank has duly tackled while making its projections for 2010-11, in which the floods fall. The first projection it made was of reduced growth. That made it virtually inevitable that it would predict that the expected inflation would exceed expectations. The report was insouciant about solutions, choosing to repeat IMF recommendations rather than engage in serious economic thinking, which consist of an increase in the tax base through a changed GST and a flood tax. The report also sees this as an opportunity to make changes which will be carried past this period of hardship and made permanent. While entering the area of taxation, the report does not mention that agricultural incomes remain untaxed, let alone recommend bringing them into the tax net. The State Bank sees inflation for the current fiscal at 14.5 percent, up from the target of 9.5 percent, which was itself punitively high. This has been accompanied with a growth projection of between 2 and 3 percent, which is not so much of a dip as a continuation of the low growth that has afflicted the economy in recent years. If it is already predicting a rate so high, it will mean only that the State Banks argument that the floods will not cause the inflation, stands contradicted. The State Bank believes that vegetables and minor crops will not remain in short supply for more than three months. For other food, especially livestock products, the State relies on international prices to keep local prices in check. Though the State Bank makes the obvious point that the floods will make macroeconomic targets go out of the window, it also highlights something that the government would like kept quiet: that federal deficits are also out of control. The solution preferred by the international lending agencies is of hiking taxes, even though the alternative of reducing government extravagance, and thus expenditures, has not been tried. The government should concentrate on solving the problems of the common man, instead of its obedience to the USA, not just in the war on terror, but also in rehabilitation of the flood victims, and their desire to make a decent living. The report reflects a government which does not really care, so long as the lending agencies are satisfied. Action is needed if the economy is to be put on an even keel.