Pakistan has achieved the most significant drop in sovereign default risk among emerging markets, according to Bloomberg Intelligence. The credit default swap (CDS)-implied probability of default for Pakistan fell from 59% to 47% over the past year — an 11-point improvement that places Pakistan at the top of Bloomberg’s Global Emerging Market (EM) Rankings.
Global Recognition Signals Investor Confidence
This shift reflects growing investor confidence in Pakistan’s economic recovery. Khurram Schehzad, adviser to the finance minister, hailed the development as a “resounding signal” to global investors that Pakistan is regaining credibility and momentum through reform.
“This marks Pakistan’s return to economic stability and sends a clear message of progress,” he shared in a social media post.
Read: Field Marshal Vows Swift Justice for Terrorism in Pakistan
How Sovereign Risk Is Measured
CDS contracts act like insurance for investors, protecting them against the risk of a country failing to repay debt. A lower CDS cost indicates improved creditworthiness. Bloomberg Intelligence uses these instruments to track and compare sovereign risk across emerging markets.
While Pakistan showed the sharpest risk reduction, other countries, such as Egypt and Turkiye, experienced increases in their default risk over the same period.
Reform and Recovery After 2023 Crisis
In 2023, Pakistan narrowly escaped default, thanks to an emergency IMF bailout and crucial support from Saudi Arabia, the UAE, and China. Since then, the country has enacted a series of IMF-endorsed reforms focused on economic stability and fiscal discipline.
Credit Agencies Echo Optimism
Global rating agencies like Standard & Poor’s and Fitch have responded to Pakistan’s economic adjustments with improved outlooks. The government’s prioritization of debt repayment and macroeconomic stabilization has played a key role in restoring market trust.
Structural Reforms Drive Progress
Schehzad credits the turnaround to four major factors: macroeconomic stabilization, structural reforms, effective IMF engagement, and consistent debt servicing. These steps have helped revive investor confidence and reduce Pakistan’s vulnerability in global financial markets.
This achievement marks a milestone in Pakistan’s ongoing journey toward sustainable economic recovery.
Follow us on Instagram, YouTube, Facebook,, X and TikTok for latest updates
