Towards‘Good’ Economic Governance Chapter 2: Towards‘Good’ Economic Governance There is a dire need for‘good’ economic governance today. The economy is mired in a low growth path and high inflation. Successive attacks of COVID-19 have shaken the foundations of the economy and led to quantum increases in unemployment and poverty which the various relief packages have been able to ameliorate only partially. Now Pakistan has gone back to an IMF Program which asks perhaps for the most comprehensive and tough reforms ever. These reforms will need to be implemented quickly as soon as the attacks of COVID-19 subside. Various authors have identified different characteristics of‘good’ economic governance, including financial discipline, consistency, credibility, ability to manage crisis, integrity, transparency, effective delivery of services, protection of public interest and national sovereignty. The objective of this chapter is to make specific proposals for improvement in the quality of economic governance in the country. The chapter commences with identification of relatively weak areas of governance as per the Country Policy and Institutional Assessment undertaken by the World Bank for selected countries, including Pakistan. 2.1. Pakistan’s Rating in Economic Governance The World Bank has identified 21 areas of economic governance. Each area is rated from 1 to 6, with 6 representing the best rating. The CPIA ratings of Pakistan are listed below in Chart 9.1. The average rating of the selected countries is close to 3.5. Pakistan does not do so well in the ratings. Out of the 21 areas, the performance is average in 10 areas and relatively poor in as many as 11 areas. A comparison is made with Sri Lanka. Pakistan’s average rating is 12 percent below that of Sri Lanka. Similarly, it is over 25 percent below the average rating of Vietnam. The ratings are exceptionally low in two areas – fiscal policy and gender equity. The best indicator of failure of fiscal policy is the high level of Government debt. It stands today at 78 percent of the GDP whereas according to the Fiscal Responsibility and Debt Limitation Act of 2005, it should be below 60 percent of the GDP. The fiscal deficit annually should be in the range of 3 percent to 4 percent of the GDP whereas in recent years it has been between 7 percent to 9 percent of the GDP. 19