Pakistan Leads Global Rankings in Reducing Sovereign Risk - Bloomberg Intelligence

Pakistan has recorded the world’s sharpest decline in sovereign default risk over the past year, according to new data cited by a senior finance official. The data, published by Bloomberg’s research arm, showed that Pakistan’s credit default swap-implied probability of default fell from 59 percent to 47 percent over the past 12 months, marking the biggest reduction among tracked emerging markets. Credit default swaps (CDS) are insurance-like financial contracts that allow investors to hedge against the risk of a government failing to repay its debt. Bloomberg Intelligence uses CDS pricing to assess a country’s sovereign risk in its Global EM Rankings.

Khurram Schehzad, adviser to the finance minister, highlighted that Pakistan stands out globally as the most improved economy in terms of reduction in sovereign default risk. He emphasized that this improvement sends a positive signal to global investors about Pakistan's stability, credibility, and reform efforts. The improvement in Pakistan’s risk profile comes after the nation narrowly avoided a sovereign default in 2023. With support from the IMF and key allies, Pakistan has undertaken structural reforms and fiscal adjustments to stabilize the economy.

Credit rating agencies have acknowledged the progress, and the government has prioritized timely debt servicing and macroeconomic discipline. Schehzad attributed the improved outlook to macroeconomic stabilization, structural reforms, successful IMF engagement, and timely debt repayments.

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According to the source: Arab News.