Islamabad, Dec 19: Pakistan’s Credit Default Swap (CDS) spread, a measure of credit default risk, has dropped to a low of 505 basis points (5.05%), marking a significant recovery of over 11,883 basis points (11.89%). This figure is now even lower than some emerging and frontier markets.
The 5-year CDS spread has decreased from 12,388 basis points in November 2022, reflecting a notable decline in default risk.
This improvement is attributed to better debt management, increased foreign reserves, and fiscal discipline, which have helped restore market confidence in Pakistan’s ability to meet its sovereign obligations.
As investor confidence grows, Pakistan’s global bonds have been performing well, encouraging optimism about the country’s financial health. Mr. Khurram Schehzad, Advisor to the finance minister, highlighted that the drop in country risk premiums presents a timely opportunity for Pakistan to re-enter global capital markets, especially as global interest rates are decreasing
. This could lead to lower borrowing costs and greater liquidity, easing external pressures and strengthening Pakistan’s economic outlook. With its improved credit profile and favorable market conditions, Pakistan is well-positioned to attract investment and credit flows.
