Index of Freedom from‘Fear’ The trend in the overall Index of External Financial Vulnerability is shown in Chart 6.4. It rose to a peak of 0.568 in 2010-11, when Pakistan had a large current account surplus. Since then, it has been falling and is down to 0.140 only in December 2022. A comparison is made of the vulnerability of 11 countries, which are considered to be in a financially weak position in Box 6.2. Chart 6.4: The External Financial Vulnerability Index, 2001-02 to(December) 2022 The extent of external financial vulnerability is perhaps the biggest security threat currently to the people of Pakistan. Already the country is seeing inflation at over 30%, and industrial production is, more or less, at a standstill or falling due to a shortage of imported raw materials and inputs. A rising trend of unemployment and poverty is being witnessed. Box 6.2: The External Vulnerability Index An External Variability Index(EVI) has been constructed by Pasha(2022) of countries which were considered to be in a precarious financial position as of the end of 2021. 1. Nigeria 2. Ghana 3. Türkiye 4. Ecuador 5. Pakistan EVI 0.285 0.440 0.488 0.519 0.535 6. Egypt 7. Kenya 8. Argentina 9. Ethiopia 10. Sri Lanka EVI 0.539 0.542 0.569 0.637 0.764 The indicators are(1) External debt as% of GNI;(2) External debt as% of Exports;(3) Reserves as% of External Debt;(4) Debt Service as% of Exports;(5) Short-term Debt as% of External Debt. The ranking is as follows: The smaller the EVI, the less the vulnerability. Sri Lanka was the most vulnerable country and has since defaulted. The EVI score of Pakistan is 0.535, indicating an intermediate level of vulnerability. It is estimated that by the end of 2022, the EVI of Pakistan has fallen to 0.412. 39