ISLAMABAD: Pakistan has witnessed one of the sharpest drops in sovereign default risks and stands second worldwide based on Credit Default Swap-implied probability, the country’s finance adviser said on Sunday, citing data from Bloomberg.
A Credit Default Swap-implied probability is the market’s forward-looking estimate of the probability of a borrower defaulting on their debt as derived from the spread of their Credit Default Swap (CDS) contract.
The South Asian country is second only to Turkiye in the Emerging Market (EM) rankings, recording 22 percent reduction in default risk over the last 15 months from June 24 till September 25, according to Khurram Schehzad, adviser to the finance minister.
“Default probability down by a massive 2,200 basis points,” Schehzad said on X. “Pakistan is the only country in the EM sample showing consistent quarterly improvement across the past year.”
The development comes as the South Asian country navigates a long path to economic recovery under a $7 billion International Monetary Fund (IMF) program.
Schehzad said this sharp decline in country’s default risk resulted from macroeconomic stability, structural economic reforms, timely debt servicing, staying the course with the IMF program, and positive ratings actions from global agencies such as S&P, Fitch and Moody’s.
“Message to investors: Pakistan is steadily rebuilding market credibility, standing out as one of the most improved sovereign credit stories in the emerging market universe,” he added.
