Pakistan Leads World in Decline of Sovereign Default Risk, According to Bloomberg Intelligence

Strategic Insights -

Pakistan's economy has achieved remarkable progress in reducing default risk, outpacing other countries in the process. The nation's credit default swap (CDS)-implied probability of default declined significantly, from 59% to 47%, marking the largest reduction among emerging markets globally. This achievement is attributed to renewed investor confidence, macroeconomic stabilisation, structural reforms, successful engagement with the International Monetary Fund (IMF), timely debt repayments, and positive credit outlooks from global rating agencies.

Key Takeaways:

  • Pakistan has achieved the world's steepest decline in sovereign default risk over the past year, according to Bloomberg Intelligence's Global Emerging Market (EM) Rankings for credit risk improvement.
  • The nation's credit default swap (CDS)-implied probability of default declined from 59% to 47% over the last 12 months, an 11 percentage point drop and the largest reduction among emerging markets globally.
  • Pakistan's success in reducing default risk outpaces other countries, including Argentina, Tunisia, and Nigeria, while some nations such as Egypt, Gabon, and Turkey have seen their default risks increase.
  • Factors contributing to Pakistan's progress include macroeconomic stabilisation, structural reforms, successful IMF engagement, and timely debt repayments.
  • Khurram Shehzad, adviser to the finance minister, attributes Pakistan's achievement to the country's 'macroeconomic stabilisation, structural reforms, successful IMF engagement, and timely debt repayments.'
  • Prime Minister Shehbaz Sharif welcomes the Bloomberg report, expressing satisfaction over the acknowledgment of Pakistan's economic stability and attributing the gains to the sustained efforts and dedication of the government's economic team.

Statistics:

  • Pakistan's credit default swap (CDS)-implied probability of default declined from 59% to 47% over the last 12 months.
  • The 11 percentage point drop is the largest reduction among emerging markets globally.
  • Pakistan's default risk reduction outpaces other countries, including Argentina (7.4 percentage points), Tunisia (6.5 percentage points), and Nigeria (5.1 percentage points).
  • Global rating agencies such as Fitch and SandP have provided positive credit outlooks for Pakistan.
  • The nation has achieved significant macroeconomic stabilisation, structural reforms, and successful IMF engagement.

Sources:

  • Bloomberg Intelligence's Global Emerging Market (EM) Rankings for credit risk improvement, provided by the finance minister's adviser.
  • Khurram Shehzad's social media statement on X.
  • Prime Minister Shehbaz Sharif's statement welcoming the Bloomberg report.