The State Bank of Pakistan (SBP, the central bank) expects the federal budget deficit to be in the range of 6-6.5% of GDP in fiscal year 2010/11 (July-June), based on the fact that the shortfall in the first half of 2010/11 alone was equivalent to 2.9% of projected annual GDP. Given the poor prospects for the introduction of the RGST and the fact that spending pressures have increased, owing to the floods, we estimate that the budget deficit will average 6.7% of GDP in 2010/11, up from an estimated 6.3% in 2009/10. This is well above the deficit target set by the IMF, of 4.7%, and would make 2010/11 the second consecutive year in which the budget deficit exceeded the Fund's target by a significant margin. (In 2009/10 the deficit was 1.2 percentage points higher than the IMF target of 5.1%.) Continued high government spending, coupled with delays and shortfalls in budgetary support from multilateral donors, mean that we expect the deficit to narrow only slightly in 2011/12-2014/15, to an average annual rate of 5.4%.