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Pakistan default risk declines 88%: report

KARACHI: Pakistan’s perceived risk of default has sharply declined, as reflected by the 88% fall in its five-year credit default swap (CDS) spreads to 1,493 basis point (bps) since their peak in November 2022, says brokerage firm Topline Securities.

It adds that the improvement comes on the back of stabilising macroeconomic indicators and a healthier external account. Foreign exchange reserves have risen to over $12 billion in December 2024, a significant recovery from the precarious low of $2.9 billion in February 2023.

But what does this mean for the country? Karim Punjani — ex equities and treasury fund manager — said that Pakistan’s high CDS spreads are not an anomaly, adding that the COVID-19 pandemic affected all economies, and the CDS spreads of almost all countries shot up.

What is unique for Pakistan is “political concerns” that further exacerbated the issue.

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