Pakistan Sees One of the Sharpest Drops in Default Risk — Outperforming Most Emerging Markets
October 5, 2025
Pakistan has become one of the top-performing emerging markets in the world, showing one of the sharpest declines in default risk over the past 15 months, according to Bloomberg’s latest data.
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According to Khurram Schehzad, Adviser to the Finance Minister, Pakistan now ranks as the second most improved economy globally in terms of reduced sovereign default probability, based on Credit Default Swap (CDS)-implied metrics.
What Does “Default Risk” Mean?
A Credit Default Swap (CDS) acts like financial insurance — it protects investors against the possibility that a borrower (such as a country or company) won’t repay its debt.
When the price of a CDS decreases, it signals that investors believe the borrower has become less risky. In Pakistan’s case, the significant drop in CDS prices means global investors now see the country as much less likely to default on its obligations.
Pakistan’s Remarkable Improvement
Between June 2024 and September 2025, Pakistan’s default probability dropped by nearly 2,200 basis points, marking one of the largest improvements among major emerging economies.
This sharp improvement places Pakistan just behind Turkey in the global rankings for default risk reduction.
Notably, Pakistan is the only country among the tracked emerging markets to show consistent quarter-on-quarter improvement throughout the past year.
In comparison, other countries like South Africa and El Salvador recorded only modest progress, while Argentina, Egypt, and Nigeria saw an increase in risk levels.
Why Investors Are Paying Attention
Experts attribute Pakistan’s strong performance to:
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Macroeconomic stabilization and policy reforms
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Timely debt repayments
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Commitment to the IMF program
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Positive ratings upgrades from agencies like S&P, Fitch, and Moody’s
“These improvements show growing investor confidence in Pakistan’s economic management,” said Khurram Schehzad. “The country is rebuilding credibility in global markets and emerging as one of the most improved sovereign credit stories in the world.”
A Positive Signal for the Future
Pakistan’s steady progress reflects its determination to strengthen market trust and stabilize its economy.
As Schehzad noted, “Pakistan’s consistent performance is setting it apart — making it a market to watch in the global emerging market landscape.”
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Pakistan has recorded one of the world’s sharpest declines in default risk, outpacing most emerging markets and signaling growing investor confidence in its economy.
