THE State Bank of Pakistan has not forecast anything but its own correctness by backing its first-quarter estimates for growth and inflation, in its report on the second quarter of the current fiscal year, 2009-10, released on Monday. It continues to predict GDP growth as meeting the low target predicted for it, while it sees CPI inflation as heading for the same relatively high figure as before. However, the State Bank sees the fiscal deficit as higher than predicted, because of increased expenditure on defence, and weakness in revenue collection. The increased defence expenditure is being incurred because of Pakistans needless involvement in the war on terror. The failures in revenue collection are because of an inefficient and corrupt tax-collection machinery. The Report says that tax reform has the most limited revenue impact during times of economic stress. In the short run, there may be few options to control the fiscal deficit. That is not just a cop-out, but a cop-out in advance, from the State Bank for the federal government. The control of the fiscal deficit is something that a responsible government carries out in such inflationary times. The report sees the predicted slowdown in the agricultural sector, but sees it offset enough by the growth in the large-scale manufacturing, construction and services sectors, combined with strong domestic demand, to sustain the revival of growth in the medium term. That the report sees inflationary pressures as re-emerging is not healthy. Combined with the news that the federal deficit needs to be reined in, it means that the common man continues to be under pressure, and will count himself lucky if inflation remains at the targeted 11 to 12 percent. The government must at once contain those extravagant impulses it has so far given full rein to, and start with the vast army of ministers now in the federal cabinet, who have been behaving as if there is no tomorrow, and what is more, doing so on the taxpayers expense. The State Bank has itself blamed law and order for the state of the economy, so the war on terror is to be blamed for that, as well as increased defence expenditure. The State Bank has not mentioned its own role in keeping the economy off the growth path, by keeping interest rates high in its latest review, recently. Though the government has a role to play, so does the State Bank, and it should keep this in mind. However, when all is said and done, the primary role remains that of the government, both directly and as the State Banks ultimate supervisor. For that, it must adopt economic policies that are people- and business-friendly.