- Pakistan has emerged as the top economy in reducing sovereign risk.
- The sovereign default probability fell from 59% to 47%, a drop of 1,100 basis points.
- Other countries like Argentina and Nigeria witnessed lesser improvements in risk.
- Prime Minister expresses satisfaction with the economic report from Bloomberg.
- Pakistan managed a crucial bailout to avoid sovereign default in 2023.
Pakistan Declares Progress in Sovereign Risk Reduction
Pakistan is now leading the world of emerging markets when it comes to reducing sovereign risk, according to Khurram Schehzad, who is an adviser to the Finance Minister. Citing data from Bloomberg Intelligence, Schehzad noted that the country’s sovereign default probability decreased significantly from 59% to 47%. This impressive decrease of 1,100 basis points makes Pakistan the country with the most substantial improvement globally in terms of sovereign risk.
International Confidence Grows in Pakistan’s Economy
In comparison, other countries like Argentina, Tunisia, and Nigeria have also seen some positive movement, albeit less dramatic – with improvements of just -7%, -4%, and -5% respectively. On the flip side, nations such as Turkiye, Ecuador, Egypt, and Gabon have experienced increased sovereign risk. Schehzad is confident that this dramatic drop in default probability sends a hopeful message to investors worldwide regarding the country’s economic trajectory. He pointed to key areas of success including macroeconomic stabilization and a solid structural reform agenda.
Future Goals Amid Economic Shifts
This positive news comes especially on the heels of Pakistan’s narrowly averted sovereign default in 2023. With dangerously low foreign reserves, the country managed to secure a crucial short-term bailout from the International Monetary Fund (IMF), with support from allies like Saudi Arabia and China. Finance Minister Muhammad Aurangzeb recently revealed that Pakistan’s economy likely expanded by 2.7% for the fiscal year ending in June 2025, a modest increase from the previous year’s growth of 2.5% but below the government’s target of 3.6%. Apparently, the government is optimistic about the future, aiming for an ambitious 4.2% growth next fiscal year while navigating various national priorities like investment and defense spending amid ongoing regional tensions.
Pakistan’s substantial reduction in default risk signals a promising shift in its economic outlook. With significant backing from the IMF and key allies, along with a focused reform agenda, the country is attracting newfound attention from global investors. The road ahead seems paved with challenges, but the government remains optimistic about sustained growth and stability moving forward.
