Pakistan is now the second best performer worldwide in CDS implied default risk reduction over the past fifteen months, according to Bloomberg data.
CDS prices signal improved credit outlook
Credit Default Swap implied probability has fallen sharply for Pakistan, which means investors now assign a lower chance of sovereign default.
The decline totals about two thousand two hundred basis points from June 2024 to September 2025, placing Pakistan second only to Turkiye among emerging markets for improvement.
In addition, Pakistan is the only country in the sample to post consistent quarterly gains across the past year.
Meanwhile, several peers have moved in the opposite direction, as default risk increased for Argentina, Egypt, and Nigeria, while improvements in South Africa and El Salvador were modest.
Reforms and ratings actions bolster confidence
Furthermore, authorities link the risk compression to macroeconomic stabilisation, structural reforms, and timely debt servicing under the International Monetary Fund programme.
Ratings actions by S and P Global, Fitch, and Moody’s have reinforced this trend by signalling better policy traction and reduced near term funding stress.
Consequently, lower CDS pricing reflects stronger investor appetite for Pakistan’s assets and an improved ability to refinance obligations.
In parallel, adherence to programme conditions, tighter fiscal management, and cautious monetary policy have supported disinflation and narrower imbalances, which collectively strengthen market perceptions of creditworthiness.
From crisis to cautious recovery
Finally, the improvement follows a severe period in 2023 when foreign exchange reserves fell, external payments came under pressure, and default risk spiked before emergency assistance arrived.
The IMF disbursements and support from partners including China, the United Arab Emirates, and Saudi Arabia stabilised the position and created room for reforms.
Looking ahead, sustaining the gains will require consistent policy delivery, stronger exports and remittances, deeper investment inflows, and continued transparency in debt management.
As confidence rebuilds, investors will watch fiscal consolidation, reserve accumulation, and growth friendly reforms to judge whether the current trajectory can be maintained.
