ISLAMABAD: Pakistan has witnessed one of the steepest declines in its sovereign default risk worldwide, emerging as the second-best performer among global economies, according to Credit Default Swap (CDS)-implied data cited by Bloomberg. The development was highlighted by Khurram Schehzad, adviser to the finance minister, who said Pakistan is the only country showing consistent quarterly improvement over the past year.
A Credit Default Swap measures how risky investors consider a borrower whether a corporation or a country. When the cost of a CDS falls, it means investors perceive a lower chance of default. In Pakistan’s case, the sharp drop in CDS-implied default probability signals growing global confidence in the country’s ability to meet its financial obligations.
“Based on Bloomberg’s latest data, Pakistan stands out globally as the second most improved economy in terms of reduction in sovereign default risk,” Schehzad said in a post on X (formerly Twitter). He added that Pakistan ranked just behind Turkiye among emerging markets (EMs) and has seen one of the largest improvements in its credit outlook between June 2024 and September 2025.
“Importantly, Pakistan is the only country in the EM universe that has shown consistent quarterly progress throughout the past year,” he noted, adding that the country’s default probability has dropped by nearly 2,200 basis points.
According to Schehzad, this marks the sharpest decline among major emerging markets, outpacing South Africa and El Salvador, while nations such as Argentina, Egypt, and Nigeria have experienced rising default risks during the same period.
He attributed the turnaround to macroeconomic stabilisation, structural reforms, timely debt repayments, and Pakistan’s adherence to the IMF programme, all of which have strengthened investor sentiment. “The sharp decline in risk reflects strengthening market confidence in Pakistan’s financial stability,” he said.
Schehzad also pointed to recent positive rating movements from global agencies such as S&P Global, Fitch, and Moody’s, noting that these upgrades have reinforced optimism about Pakistan’s economic trajectory.
“Pakistan is steadily rebuilding its market credibility,” he added. “It now stands out as one of the most improved sovereign credit stories in the emerging market space.”
The country’s economic turnaround follows a turbulent period marked by critically low foreign reserves and fears of default in 2023. The crisis was narrowly avoided after Pakistan secured a vital IMF loan tranche, coupled with financial assistance from friendly nations including China, Saudi Arabia, and the UAE.
Since then, Islamabad has implemented a series of tough IMF-backed reforms tightening fiscal controls, rationalising subsidies, and improving revenue collection to stabilise the economy and restore investor trust.
Economists say that while challenges remain, the consistent drop in Pakistan’s default risk offers a clear sign that the country’s efforts to regain global financial credibility are beginning to pay off.
