Pakistan's credit default swap spread falls to 5.05%

Pakistan's Credit Default Swap (CDS) spread, a measure of insurance against credit default risk, has dropped to a low of 5.05% providing the country with an opportunity to attract inflows.

Country’s risk premium has recovered by over 11.89% from the high of 12.38% in November 2022. This level is now lower than that of some emerging and frontier markets.

Khurram Schehzad, Advisor to the Finance Minister, stated, "The decline in country risk premiums provides a timely opportunity for Pakistan to plan and re-enter global capital markets, particularly with global interest rates on the decline. Lower borrowing costs and increased liquidity will help alleviate external pressures further, thereby strengthening Pakistan's external position and boosting its economic prospects."

"With its improved credit profile and favorable market conditions, Pakistan is now well-positioned to capitalize on this opportunity and attract credit and investment flows," Schehzad added.

As investor confidence rises, Pakistan's global bonds have been rallying, making creditors increasingly optimistic about the country's financial health.

The country's 5-year CDS spread has decreased from 12,388 basis points in November 2022, indicating a substantial reduction in default risk.

Improved debt management, increased foreign reserves, and fiscal discipline have bolstered market confidence in Pakistan's ability to meet its sovereign obligations.