ISLAMABAD – Pakistan has made a notable turnaround on the economic front, earning the top spot among emerging markets for improvement in sovereign credit risk, as per a recent Bloomberg Intelligence analysis.
The report highlights a significant decline in Pakistan’s sovereign default risk over the past year, reflecting growing investor confidence. This positive momentum is attributed to macroeconomic stability, structural reforms, and effective collaboration with the International Monetary Fund (IMF).
Adviser to the Prime Minister on Finance, Khurram Schehzad, shared the development on X, revealing that Pakistan’s Credit Default Swap (CDS)-based default probability dropped from 59% to 47% — an 11-percentage-point decline, the most substantial among tracked emerging economies.
“Pakistan has become the world’s top performer in reducing sovereign default risk,” Schehzad stated, adding that the improvement signals a revival of investor trust and validates the country’s ongoing fiscal and structural reforms.
CDSs are financial instruments used by investors to insure against the risk of a government defaulting on its debt. A drop in CDS-implied risk indicates improved investor sentiment and reduced perceived default threat.
While other countries like Argentina, Nigeria, and Tunisia also saw improvements, none matched the scale of Pakistan’s progress. In contrast, nations such as Turkey, Ecuador, Egypt, and Gabon witnessed a rise in their credit risk.
Economic analysts attribute Pakistan’s recovery to responsible fiscal management, punctual debt servicing, and improved credit ratings from global agencies like S&P and Fitch. Schehzad emphasized that Pakistan is not merely stabilizing but is steadily progressing with credibility and reform at the forefront.
This development offers rare optimism for an economy that has recently grappled with inflation, foreign debt pressure, and currency instability.
In a related boost, Fitch Ratings earlier this year upgraded Pakistan’s long-term foreign currency rating from ‘CCC+’ to ‘B-’, citing better fiscal discipline and reform momentum under the IMF programme. Fitch also acknowledged narrowing budget deficits, declining inflation, stronger foreign reserves, and a projected GDP growth of 3% for FY2025.
Rising remittances, expected to reach $38 billion by FY25, and ongoing reforms have been noted as key drivers behind Pakistan’s improving economic outlook — signaling increased global confidence in the country’s direction.
