Zulfikar All Bhutto, the shrewd politician who has inherited power from the military regime in Islamabad, has prescribed a fundamental overhaul of Pakistan's Internal and foreign policies, including imminent release of the Bengali independence leader, Sheik Mujibur Rahman.

Drastic change, long overdue in the Moslem state, has been made mandatory by Pakistan's shattering defeat the war with India and the Mukti Bahini of East Bengal. The change has to begin with President Bhutto himself.

For eight years, Mr. Bhutto served the military dictatorship which he now condemns and replaces. He has been a vociferous advocate of the policy of confrontation with India, a policy that favored military strength over economic development and which ultimately led to the current disaster. As the leading political figure in West Pakistan, he refused to come to terms with autonomy demands of the elected leaders of East Pakistan earlier this year, a posture that helped precipitate the political crisis that has ended in disaster for the Western wing. He gave vocal support, at least in the early stages, to the harsh military crackdown that sealed the total estrangement of “Bangladesh.”

Mr. Bhutto has been one of the architects of his nation's present fate. But his ability to shift with the tides of political reality, which some regard as crass political opportunism, could now serve the new President and Pakistan well. For the new realities create opportunities as well as problems for the new leadership.

Bengal's loss, a blow which President Bhutto apparently does not yet fully acknowledge, could be a blessing in disguise. It frees the more prosperous West of the increasing burden of support for the heavily overpopulated, impoverished East. And it gives Mr. Bhutto an opportunity to build promised new democratic institutions in a more viable state, based on far greater geographic, cultural and political unity than existed in the old bifurcated nation that emerged from the chaos of the 1947 partition of the Indian subcontinent.

Decisive defeat at the hands of the Indians is a bitter pill to swallow for the Pakistanis, steeped as they are in military tradition. But it could have healthy results if it forces the new leadership to abandon the myth of military invincibility, to come to terms with its Indian neighbors and to shift human and material resources that have been squandered on an excessive military establishment to urgent development tasks.

President Bhutto indicated in interviews here last week that he is painfully aware of the need for change. If he will now employ his vaunted oratorical skills to lead his people toward democracy and peace within the confines of the new Pakistan, he will deserve the American sup port that President Nixon indicated he would get at their meeting in Washington last Saturday.