The State Bank of Pakistan annual report for the last fiscal year (2009-2010) highlights the inflation at 14.5 percent against the target of 9.5 percent set by the government. The report has blamed this on governments failure to broaden the tax base and budget deficit.
The SBP has rightly criticized the governments mismanagement and failure to reform the tax system and control inflation of food items. On a second note, the SBP should also put its own house in order. Why did it allow the banks to write off loans worth billions in rupees? It should also not approve government loans that are intended to be used for administrative operation.