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, citing data from Bloomberg, reported 24NewsHD TV channel on Monday.
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) programme.
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 programme, 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.
Economy to stay afloat despite floods
The International Monetary Fund (IMF) does not foresee any major setback to Pakistan's economic growth or revenue collection this fiscal year due to the recent floods. Except for Punjab, provinces have also not reported significant economic losses, minimizing the chances of a downward revision in targets.
According to reports, Pakistani authorities have assessed flood-related losses in three rivers, but the evaluation of destroyed or damaged infrastructure in Punjab is still ongoing.
Reports said that an IMF delegation shared its views about the economic impacts of the floods during a kick-off meeting with Finance Minister Senator Muhammad Aurangzeb. The governments of Balochistan, Sindh and Khyber-Pakhtunkhwa shared their initial assessments of the flood losses with the IMF team during separate meetings.
The global lender also saw no impact of the floods on the tax revenues. It underscored that the Federal Board of Revenue (FBR) should share the visible outcome of the transformation plan. Prime Minister Shehbaz Sharif had approved the transformation plan last year to revitalise the tax machinery and also gave over Rs55 billion for various initiatives under the plan.
Reporter Ahmad Mansoor