Leading Issues in the Economy of Pakistan: Agenda for Reforms 9.3 State of Economy in Vulnerable Countries The key macroeconomic indicators in 2021 or 2022 are presented for eight of the eleven countries for which information was available in Table 9.7. Table 9.7: Trend in External Vulnerability Indicators of Pakistan Country* GDP Growth Rate 2021-22 Rate of Inflation (Current) 2022 Rate of Depreciation of Exchange Rate (Dec 21 to Dec 22) Nigeria 3.2 21.5 8.3 Ghana 3.6 50.3 46.4 Egypt 6.6 18.7 58.0 Ethiopia 3.8 35.1 9.8 Türkiye 5.0 84.3 58.1 Pakistan 6.0 23.8 26.8 Argentina 4.0 92.4 71.0 Sri Lanka-8.7 61.0 83.4 AVERAGE 2.9 48.4 45.2 *Presented by the degree of smallness of the External Vulnerability Index Source: WDI, Others (%) Current Account Deficit as% of GDP 2021 -0.2 -5.2 -3.6 -4.5 -5.7 -4.6 -0.3 -4.0 -3.5 Table 9.7 indicates the very adverse consequences of default and thereafter on the economy of Sri Lanka. The economy contracted by almost 9 percent in 2021-22 and the rate of inflation was as high as 61 percent, while the Sri Lanka rupee has depreciated by as much as 83 percent from December 2021 to December 2022. This has, no doubt, contributed to a drastic worsening in living standards in the country. The numbers in Table 9.7 are also revealing in the Pakistani context. Pakistan is placed, as highlighted above, in the ninth position among the eleven countries in terms of the magnitude of the EVI. However, it has a lower rate of depreciation of the national currency of 27 percent as compared to the average of 45 percent. This has been achieved by a managed float of the rupee by the SBP. This will be difficult to sustain if reserves remain low or decline further to perilously low level. There is the risk that the rupee will need to fall at a faster rate if the open market rate is not to diverge too much from the inter-bank rate. 100