Pakistan has recorded one of the sharpest drops in sovereign default risk worldwide and now ranks as the second-best performer among emerging markets, according to Bloomberg data cited by Khurram Schehzad, adviser to the finance minister.
Bloomberg Pakistan Default Risk Update
According to Bloomberg, the country’s Credit Default Swap (CDS)-implied probability — which reflects the market’s perception of default risk — has decreased by 2,200 basis points between June 2024 and September 2025. This means investors see Pakistan as less likely to default on its debt than they did 15 months ago.
Khurram Schehzad said on X that “as per the latest data posted by Bloomberg, Pakistan stands out globally as the second most improved economy in terms of reduction in sovereign default risk.” He added that only Türkiye ranked higher in Bloomberg’s emerging market rankings.
What CDS Data Means for Pakistan
A Credit Default Swap is a type of financial insurance that is employed by investors in order to hedge against the default of a borrower. According to the International Monetary Fund (IMF), when CDS price is falling, the perceived risk is lower. Therefore, the decline in the CDS-implied default probability of Pakistan is an indicator of a better attitude of investors to the Pakistani debt.
Bloomberg’s data shows Pakistan is the only emerging market that has shown consistent quarterly improvement in sovereign default risk over the past year. According to Schehzad, this improvement places the country ahead of several other economies, including South Africa and El Salvador, whose risks fell by smaller margins. Conversely, the default risks in other countries such as Argentina, Egypt and Nigeria have been on the increase.
According to the finance ministry adviser, the decline in Pakistan’s risk reflects “strengthening investor confidence, supported by macroeconomic stabilisation, structural reforms, timely debt servicing, and continuity with the IMF programme.”
He also pointed to the recent improvements by international credit rating agencies such as S&P Global, Fitch, and Moody as some of the reasons. In August 2025, Moody had already upgraded the rating of Pakistan to Caa2 to Caa1 with a stable perspective due to better financial conditions.
Pakistan was seriously in an economic crisis in 2023, where the foreign exchange reserves were very low and default threatened. This situation became better when the IMF issued crucial tranches of loans and other countries like China, Saudi Arabia, and the UAE loaned them.
After these developments, the government adopted IMF-recommended reforms to stabilise the economy, tighten fiscal management and enhance the external balance.
According to the Bloomberg data on the Pakistan default risk, the credibility of the country in the market is slowly being rebuilt. The reduced default rates can assist in reducing the cost of borrowing funds, attracting investments, and accessing international debt markets.
Financial analysts feel that the recent Bloomberg Pakistan default risk trend is an indication of a positive perception shift although they emphasise that this trend will require continuity of macroeconomic reforms and sound relations with multilateral lenders.
Khurram Schehzad said the trend “marks a turning point in Pakistan’s market credibility,” adding that the country now stands as “one of the most improved sovereign credit stories in the emerging market universe.”
