Pakistan has distinguished itself as one of the world’s most improved emerging markets, posting a dramatic decline in sovereign default risk over the past 15 months, according to new data from Bloomberg.
Khurram Schehzad, adviser to the finance minister, said Sunday that Pakistan now ranks second globally in terms of reduced default probability, as measured by Credit Default Swap (CDS)-implied metrics—a key market gauge of creditworthiness.
A CDS-implied probability reflects the market’s view of how likely a borrower, whether a company or a country, is to default on its debt. The figure is derived from the price of a CDS, a financial instrument that acts as insurance for investors against the risk of default, according to the International Monetary Fund (IMF). When the cost of a CDS falls, it signals that investors see the borrower as less risky.
Pakistan’s CDS-implied default probability has plunged by 2,200 basis points between June 2024 and September 2025—the steepest drop among major emerging markets, trailing only Turkey in global rankings. Schehzad noted that Pakistan is the only country in the emerging market sample to show consistent, quarter-on-quarter improvement throughout the past year.
By contrast, countries such as South Africa and El Salvador saw only modest reductions in default risk, while others—including Argentina, Egypt, and Nigeria—experienced increases.
Schehzad attributed Pakistan’s sharp improvement to macroeconomic stabilization, ongoing structural reforms, timely debt servicing, and the government’s commitment to its IMF program. He also pointed to recent positive ratings actions from major agencies like S&P, Fitch, and Moody’s as further evidence of growing investor confidence.
“This sharp decline in risk signals strengthening investor confidence in Pakistan’s economic management and policy direction,” Schehzad said. “Pakistan is steadily rebuilding its market credibility and stands out as one of the most improved sovereign credit stories in the emerging market universe.”
He added that Pakistan’s consistent progress is setting it apart, making it a market to watch for global investors.
