Bad governance is the root cause of all ills in Pakistan. Absence of government writ is the worst kind of governance. Bad governance is the breeding ground for corruption, which damages a country’s development, and is highly regressive and inequitable. Pakistan, is facing numerous challenges and issues since long, so the Covid-infected world lurches into 2021, with a mix of hope and concern. Pakistan is not a unique case. A number of countries have encountered broadly similar economic challenges, implemented appropriate policies, and have restored self-sustaining rapid growth with internal and external stability over the medium term after appropriate policies were implemented. Pakistan cannot get out of the current economic malaise and resume sustainable growth without excessive dependence on external handouts. The Pakistani authorities struggled to develop a coherent adjustment program; policy implementation has also remained inadequate. Critical differences between Pakistan and countries that have recently adjusted successfully – such as Chile, Brazil and Turkey – lies in Pakistan’s inability to grasp the seriousness of the economic crisis and lack of commitment to the needed policy reform, that is, poor governance. The deterioration of Pakistan’s economy over the past three decades can be attributed to the continuation of inappropriate macroeconomic policies that focused on credit-financed consumption demand and imports to promote growth as external resource pressures were eased by debt relief and increased foreign aid. Pakistan is encountering two inter-related problems; macroeconomic imbalances and inflationary pressures which reflect an expansionary and dysfunctional fiscal policy supported by a compliant monetary policy; and low domestic savings which, given the increasing strains on external debt sustainability and a poor outlook for private capital inflows, are inadequate to sustain investment that is needed for a higher growth rate. Even if energy shortages were to be addressed and the fiscal position is less onerous than at present, there is a high risk that the economy may permanently fall below the potential growth path, estimated at about 6-7 per cent per annum. The obvious fallout would be increased unemployment pressures which, in turn, will spur political instability and militancy. The viscous circle would grow more intractable. One big lesson from the political and economic history of Pakistan is that ad-hoc and inorganic political arrangements are destined to fail sooner or later A new strategy is needed that will not only change the sources of growth but also alter the mode of implementing policies. The economy should be rebalanced toward higher investment and exports and away from consumption, particularly of the public sector. This will call for not only correcting the macroeconomic imbalances, but — more importantly — significantly increasing domestic savings in a sustainable fashion, reducing dependence on uncertain and addictive foreign assistance and shifting investment to export-oriented activities. There is also an increasing recognition that the deteriorating official capacity to formulate and implement policy reforms – worsening governance — has become a primary impediment which is building on itself. The current adjustment programme that is supported by an IMF stand-by arrangement is essentially tentative and needs to be better integrated with a longer term growth strategy. A sustained increase in domestic savings to serve as the primary source of investment is central to self-sustaining growth and adjustment. Good governance implies not only absence of corruption, but also — and more importantly — not leaning against market forces unless there is an explicit case of market failure. Regulation, including of the financial sector, should aim at improving resource allocation, not turning the state as allocator of resources. Foreign financing requirements are increasing at a time when availability of such financing is shrinking for Pakistan. The lack of leadership at the political as well as at the technocratic levels might let the moment slip if urgent action is not taken to meet the challenges with a firm determination. So the new year throws the same old challenges at us — apart from Covid, of course. Unfortunately, these challenges have grown even more serious during the two and a half years of the incumbent government. The hostility between the government and the opposition has peaked. It is the lack of performance on the part of the government that the opposition that was initially divided and subdued has now grown defiant and is even planning to overthrow the government. Dialogue is the only way forward. The nation can’t afford mistakes of the past year repeated. Article 140A of the Constitution says each province shall, by law establish a local government system and devolve political, administrative and financial responsibility and authority to the elected representatives of the local governments. The real issue is of good governance. The successive governments have failed to deliver to the people because of the perpetuation of the archaic colonial system of governance which has in built avenues of graft and entitlement. The solution lies in two things: establishment of the local governments in conformity with Article 140A, and changing the way we elect our representatives. As far as providing justice to the people at their doorsteps or near their homes goes through the implementation of reforms in CPC, and separating the judiciary from the administration in line with Article 175(3). One big lesson from the political and economic history of Pakistan is that ad-hoc and inorganic political arrangements are destined to fail sooner or later. It is also imperative to break the hold of the elitist classes and feudal lords on the political power by changing the present system of election. The prevalent system strengthens the hold of the feudal lords or the elitist classes belonging to the urban areas which have a common interest in perpetuating the archaic colonial system of governance. The PTI’s regime has failed on three most important accounts: governance; economy; and foreign policy. Transparency International says corruption has increased manifold in Pakistan since PTI came into power. The UNDP’s Human Development Index (HDI) Report, Pakistan’s ranking became worse under the PTI’s government. The ADB has projected that Pakistan’s economic growth will be one of the lowest, with highest inflation in the region in the coming years – dropping from near six percent in 2017-18. The country has been loaded with non-productive Rs11 trillion debt in just two years. Moreover, Pakistan has one of the highest rates of food inflation compared to other countries in the region – and for the first time the country will be importing wheat, sugar and cotton. Due to incompetence and corruption, hundreds of billions have been lost in scandals like the LNG, sugar and wheat crises, BRT Peshawar etc. Pakistan’s relation with its allies and brotherly countries have become uneasy due to the PTI’s foreign policy; Pakistan has faced an unimaginable diplomatic fiasco in the case of Occupied J&K by India. History has shown repeatedly that no single institution enjoys absolute power nor can it run the state alone. Pakistan’s geo-strategic and security needs, the establishment has an important role to play which must be acknowledged. Indeed, all institutions must operate in harmony. The crisis consists precisely in the fact that the old is dying and the new cannot be born. We as a nation need to learn one lesson from the success of our friend China: economic development is the only way forward, and it requires political stability, social solidarity and certainty. The interest of Pakistan has to be put supreme. The writer is an economist, anchor, analyst and the President of All Pakistan Private Schools Federation. President@pakistanprivateschools.com