THE State Bank's annual report is anxiously awaited, not so much for its content on the past year, as for its projections on the coming year, which, as is the present case, is well underway. The State Bank has nothing particularly explosive to offer about 2008-9, the year past on which it was reporting. So its projections for 2009-10, the current financial year, are all the more important, quite apart from the fact that this is a very crucial year anyway. The report says in essence that Pakistan will join the rest of the world in the ongoing recovery, which is not particularly strong, but is noticeable not just in Pakistan but in a broad swath of economies across the world. The State Bank did not shed enough light about its own role in keeping up the interest rate, where bringing it down would have acted as a stimulus needed by the economy. It maintained interest rates at its last review, after having brought them down in the review before that. The State Bank has projected GDP growth as ranging between 2.5 and 3.5 percent, against a target of 3.3 percent. The projection, while low for a growing economy like Pakistan's, shows that the target was not as far off the mark as was initially feared. The Consumer Price Index inflation is projected by State at 10 to 12 percent, which is near the targeted inflation of 9.0 percent. Though even the targeted figure was punitive, let alone that projected, it was still an improvement on the horrendous 20.8 percent of the previous year. However, the report noted, as the State has consistently done, that there are 'significant potential risks' that could push the inflation figure upward. These include the demand pressure from the fiscal stimulus from the measures announced in the last budget, a broad-based rebound in international prices, imported inflation if the rupee weakened further and a weak fiscal position. The government cannot do all that much about the situation, not with four months of the financial year already over. However, the main thing it can do is to prevent the inflationary pressure resulting from a worsening fiscal position. In short, it must control its deficit, and not just because the IMF said so, but the government is still spending on luxuries and junkets for its ministers the country can ill-afford. It cannot force the State Bank to reduce its interest rate, which determines that for the entire country, not without compromising on its autonomy. However, the State Bank should itself take note of the wealth of evidence that its own report presents, and cut rates to a pro-growth level.