Pakistan tops emerging markets for credit risk improvement
Fitch upgraded to B- stable outlook from CCC+ in April 2025, the second upgrade in 12 months
Haris Zamir
Business Editor
Experience of almost 33 years where started the journey of financial journalism from Business Recorder in 1992. From 2006 onwards attached with Television Media worked at Sun Tv, Dawn Tv, Geo Tv and Dunya Tv. During the period also worked as a stringer for Bloomberg for seven years and Dow Jones for five years. Also wrote articles for several highly acclaimed periodicals like the Newsline, Pakistan Gulf Economist and Money Matters (The News publications)
Pakistan leads globally in reducing sovereign default risk, as measured by CDS-implied probability.
Default risk dropped from 59% to 47% in 12 months via credit default swaps
Follows 2023 near-default crisis requiring IMF bailout with regional support
Structural reforms and IMF-aligned fiscal measures restored market confidence
Pakistan has emerged as the most improved country in terms of sovereign credit risk among global emerging markets, according to Bloomberg Intelligence data cited by a senior finance official on Saturday.
Bloomberg’s research shows that Pakistan’s implied probability of default, as measured by credit default swaps (CDS), fell from 59% to 47% over the past year—an 11-percentage point drop.
This marks the sharpest decline recorded among all tracked emerging markets, outpacing economies such as Argentina, Tunisia, and Nigeria. In contrast, default risks climbed in countries like Egypt, Gabon, and Turkiye.
CDS are financial instruments used to protect investors against the risk of sovereign default. The pricing of these contracts reflects market confidence in a country’s ability to honor its debt obligations, with higher costs indicating greater risk.
“This is a resounding signal to global investors,” said Khurram Schehzad, adviser to the finance minister. “Pakistan is not just back on the map—it’s moving forward with stability, credibility, and reform at its core.”
The improvement comes as Pakistan rebounds from a near-default scenario in 2023. At the time, the country grappled with falling foreign reserves and mounting debt obligations, ultimately securing a critical short-term bailout from the International Monetary Fund (IMF), backed by support from Saudi Arabia, the UAE, and China.
Since then, the government has pursued structural reforms and tough fiscal measures aligned with IMF guidelines, aiming to restore market confidence and economic stability. These efforts have been acknowledged by major credit rating agencies such as Standard & Poor’s and Fitch through upgraded outlooks.
Schehzad credited the positive momentum to consistent debt servicing, macroeconomic discipline, and successful policy engagement with the IMF. He also noted that investor sentiment is showing signs
The rating improvements have been acknowledged by credit agencies, with Fitch upgrading Pakistan to B- (stable outlook) in April 2025, upgrading the rating for the second time in the past 12 months. Before that, it downgraded Pakistan to CCC- (stable outlook) in February 2023. S&P maintains a CCC+ rating (stable outlook) and Moody's holds Caa2 (positive outlook).
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