Pakistan has recorded one of the sharpest declines in sovereign default risk globally, positioning itself as the second-best performer worldwide, according to Credit Default Swap (CDS)-implied data cited by Finance Minister adviser Khurram Schehzad on Sunday.
Schehzad noted that Bloomberg data ranks Pakistan as the second most improved emerging market in terms of reduction in sovereign default risk over the past 15 months, from June 2024 to September 2025, trailing only Turkiye.
“Pakistan is the only country in the emerging market sample showing consistent quarterly improvement over the past year,” he said, highlighting a decline in default probability of 2,200 basis points.
CDS-implied probabilities estimate the likelihood that a borrower, whether a company or a country, will fail to meet its debt obligations. These probabilities are derived from the market price of CDS contracts, which investors purchase to protect against default, according to the International Monetary Fund (IMF). A decline in CDS costs reflects reduced perceived risk by investors.
The decline marks the steepest reduction among major emerging markets, ahead of South Africa and El Salvador, while countries like Argentina, Egypt, and Nigeria have seen their default risks increase.
Schehzad attributed the improvement to strengthening investor confidence driven by macroeconomic stabilisation, structural reforms, timely debt servicing, and adherence to the IMF programme.
Global credit rating agencies, including S&P Global, Fitch, and Moody’s, have also positively revised their outlooks for Pakistan, reinforcing investor confidence. “Pakistan is steadily rebuilding market credibility, standing out as one of the most improved sovereign credit stories in the emerging market universe,” Schehzad said.
Pakistan faced a prolonged economic crisis over recent years, with critically low foreign exchange reserves, an acute balance-of-payments shortage, and looming default risk in 2023.
The situation was stabilised after the IMF released a crucial loan tranche, supplemented by support from countries such as China, the United Arab Emirates, and Saudi Arabia. Since then, Pakistan has implemented IMF-prescribed reforms to stabilise the economy and strengthen macroeconomic indicators.
