- Pakistan ranks first globally in reducing sovereign risk.
- The CDS-implied default probability dropped sharply from 59% to 47%.
- Sovereign risk increased in countries like Turkiye and Ecuador.
- The prime minister highlighted successful agreement with IMF.
- Pakistan is targeting 4.2% GDP growth next fiscal year.
Pakistan Leads in Global Emerging Market Risk Reduction
Pakistan has emerged as a shining star in global emerging markets, particularly noted for its impressive reduction in sovereign risk. According to Khurram Schehzad, Adviser to the Finance Minister, the latest data from Bloomberg Intelligence shows that Pakistan tops the list of economies that have experienced the most significant decrease in default probability. Specifically, the country’s CDS-implied default probability saw a remarkable drop from 59% to 47%, which translates to a reduction of approximately 1,100 basis points. This sharp decline marks the largest improvement among major emerging market economies, indicating a significant turnaround for the nation’s financial outlook.
Investor Confidence Grows Amid Economic Reforms
Countries like Argentina, Tunisia, and Nigeria also made progress, though less substantial, with drops of 7%, 4%, and 5% in their default risks respectively. However, the situation is not the same for Turkiye, Ecuador, Egypt, and Gabon, where sovereign risks have intensified. Schehzad emphasized that this development is a clear “resounding signal to global investors,” signifying a growing confidence in Pakistan’s economic recovery and stability. He credited this progress to various factors, including macroeconomic stabilization, the government’s structural reforms, and the country’s ongoing constructive engagement with the International Monetary Fund (IMF). Additionally, Pakistan’s credit outlook has improved, as confirmed by international credit rating agencies such as Standard & Poor’s (S&P) and Fitch, which is crucial for investor confidence.
Economic Growth Targets and Future Outlook
Prime Minister Shehbaz Sharif expressed his approval of the Bloomberg report, which reflects positively on the stability within Pakistan’s economy. He noted that the report recognizes vital institutional reforms across multiple sectors and the successful negotiations with the IMF, which have contributed significantly to the government’s improved financial standing. Sharif stated, “Pakistan is among the few countries that, according to Bloomberg, showed the most improvement in the economy in the last 12 months,” which implies a strong direction for Pakistan’s economic future. The prime minister concluded that these positive indicators arise from the relentless efforts and dedication of his economic team, aiming higher with an expected economic growth of 4.2% next fiscal year, although challenges remain, particularly with maintaining a primary surplus and managing defense expenditures amidst ongoing tensions with India.
In summary, Pakistan has seen the most significant reduction in sovereign default risk among emerging markets, offering hope and confidence to global investors. Key measures such as government reforms and IMF support have catalyzed this economic improvement. With ambitious growth targets set for the future, the country remains focused on stabilizing its economy and addressing ongoing challenges.
