The State Bank of Pakistan (SBP, the central bank) expects the federal budget deficit to be in the range of 5.5-6.5% of GDP in 2010/11; the shortfall in the first nine months of 2010/11 was equivalent to 4.5% of projected annual GDP. Given that a reformed general sales tax (RGST, a condition of IMF support) will not be implemented during the current fiscal year, and that spending pressures have increased owing to floods in August-September 2010, we estimate that the budget deficit will widen to 6.7% of GDP in 2010/11, from 6.3% in 2009/10. This will be considerably larger than the deficit of 4.7% of GDP targeted by the IMF, and will make 2010/11 the second consecutive year in which the budget shortfall has exceeded the Fund's target by a significant margin; in 2009/10 the deficit was 1.2 percentage points greater than the IMF target of 5.1% of GDP. Continued high government spending, coupled with delays and shortfalls in budgetary support from multilateral donors, means that we expect the deficit to narrow only slightly in 2011/12-2014/15, to an average of 5.6% of GDP.