Pakistan records one of the sharpest drops in default risk

October 06, 2025 (MLN): Pakistan has emerged among the top-performing emerging markets in terms of reduced sovereign default risk, according to data shared by Khurram Schehzad, Advisor to the Finance Minister, on X (formerly Twitter).

Citing Bloomberg data, Schehzad noted that Pakistan ranks as the second most improved economy globally in reducing its CDS-implied default probability, standing just behind Turkey.

Over the past 15 months (June 2024 to September 2025), the country has witnessed one of the sharpest declines in sovereign default risk, reflecting a significant turnaround in investor sentiment.

Pakistan is also the only country in the emerging market sample to show consistent quarterly improvement in default risk throughout the past year.

The nation’s default probability has dropped by 2,200 basis points, marking the steepest decline among major EM peers, surpassing countries like South Africa (3%) and El Salvador (2%).

In contrast, several economies, including Argentina, Egypt, and Nigeria, have experienced a rise in their default risk during the same period.

Schehzad attributed this improvement to macroeconomic stabilization efforts, structural reforms, timely debt servicing, continued adherence to the IMF program, and positive rating actions from international agencies such as S&P, Fitch, and Moody’s.

He added that this trend sends a strong signal to investors, highlighting that Pakistan is steadily rebuilding market credibility and emerging as one of the most improved sovereign credit stories in the emerging market universe.

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