AGL 5.50 Decreased By ▼ -0.10 (-1.79%)
ANL 8.62 Decreased By ▼ -0.28 (-3.15%)
AVN 75.84 Decreased By ▼ -1.14 (-1.48%)
BOP 5.18 Decreased By ▼ -0.07 (-1.33%)
CNERGY 4.51 Decreased By ▼ -0.14 (-3.01%)
EFERT 81.09 Decreased By ▼ -0.13 (-0.16%)
EPCL 49.94 Decreased By ▼ -0.09 (-0.18%)
FCCL 12.51 Decreased By ▼ -0.65 (-4.94%)
FFL 5.52 Decreased By ▼ -0.18 (-3.16%)
FLYNG 6.87 Decreased By ▼ -0.23 (-3.24%)
FNEL 4.63 Decreased By ▼ -0.13 (-2.73%)
GGGL 8.53 Decreased By ▼ -0.27 (-3.07%)
GGL 14.22 Decreased By ▼ -0.38 (-2.6%)
HUMNL 5.58 Decreased By ▼ -0.09 (-1.59%)
KEL 2.62 Decreased By ▼ -0.01 (-0.38%)
LOTCHEM 27.98 Decreased By ▼ -0.67 (-2.34%)
MLCF 23.68 Decreased By ▼ -1.01 (-4.09%)
OGDC 71.64 Decreased By ▼ -0.87 (-1.2%)
PAEL 15.33 Decreased By ▼ -0.04 (-0.26%)
PIBTL 4.87 Decreased By ▼ -0.11 (-2.21%)
PRL 15.80 Decreased By ▼ -0.40 (-2.47%)
SILK 1.04 Decreased By ▼ -0.03 (-2.8%)
TELE 8.92 Decreased By ▼ -0.28 (-3.04%)
TPL 7.04 Decreased By ▼ -0.21 (-2.9%)
TPLP 18.31 Decreased By ▼ -0.39 (-2.09%)
TREET 21.03 Decreased By ▼ -0.67 (-3.09%)
TRG 134.51 Decreased By ▼ -2.04 (-1.49%)
UNITY 16.57 Decreased By ▼ -0.45 (-2.64%)
WAVES 9.34 Decreased By ▼ -0.55 (-5.56%)
WTL 1.36 Decreased By ▼ -0.05 (-3.55%)
BR100 4,155 Decreased By -70.3 (-1.66%)
BR30 15,289 Decreased By -229.2 (-1.48%)
KSE100 41,613 Decreased By -537.4 (-1.28%)
KSE30 15,360 Decreased By -228.1 (-1.46%)
Markets

Pakistan’s perceived default risk worsens 'owing to IMF uncertainty'

  • Expert says CDS would normalise after inflows from friendly countries and global lender are realised
Published November 16, 2022
Follow us

Pakistan's perceived risk of default, measured by the 5-year credit default swap (CDS), worsened further in a matter of days and hit 75.5%, owing to uncertainty over the International Monetary Fund's (IMF) ninth review.

As per data provided by brokerage house Arif Habib Limited (AHL) on Wednesday, Pakistan's 5-Year CDS increased from 5,620bps on November 14 to 7,550bps on November 15, an increase of 1,929.6bps.

A CDS is a financial derivative that allows an investor to swap or offset their credit risk with that of another investor. To swap the risk of default, the lender buys a CDS from another investor who agrees to reimburse them if the borrower defaults.

Pakistan is currently in an IMF programme, and seeking further inflows. The IMF Staff Mission is expected in Islamabad by the end of the ongoing month but the date has not yet been finalised as the Fund wants Pakistan to first make the required adjustments.

“Uncertainty pertaining to the ninth IMF review is driving this sentiment,” Abdullah Umer, a financial market expert, told Business Recorder.

The market analyst said the delay in IMF review, while the government seeks relaxation from the international lender, is adding to the uncertainty of global investors.

“However, it would normalise after inflows from foreign countries including Saudi Arabia and China are materialised,” he added.

Business Recorder reported an official, on condition of anonymity, said negotiations with the IMF are being held on a daily basis through video link and there is no veracity in reports of introducing new taxes on the demand of the IMF. The official said the political situation in the country is also one of the factors for the delay in fielding a staff-level mission by the IMF.

However, he acknowledged that the IMF has been pressing for an increase in the tax-to-GDP ratio.

Meanwhile, Umer said the increase in CDS will make raising funding from international markets more expensive, adding to the debt burden of the country.

Tahir Abbas, Head of Research at AHL echoed similar views.

"Delay in IMF ninth review and delay in US dollar inflows are the reasons. This is the highest CDS recorded since data became available from November 2006 onwards," said Abbas.

Responding to the development, ex-finance minister Shaukat Tarin expressed concern and blamed the current government for its “inept handling of the economy”.

According to latest data available, foreign exchange reserves held by the State Bank of Pakistan (SBP) plunged $956 million on a weekly basis, clocking in $7.96 billion as of November 4, 2022.

However, SBP Governor Jameel Ahmad remained confident that the central bank has sufficient stocks of foreign exchange reserves.

“We have over $7.9 billion reserves. These are more than sufficient to meet any obligations,” he said.

Comments

Comments are closed.

Kashif ALI Nov 16, 2022 07:48pm
The insurance cost of a sovereign debt is NOT the sole indicator to judge the default scenario. For sake of political opposition, Pakistanis can stoop too low to reflect some patriotism. There are many lines of defense for ensuring that Pakistan will keep away from being default. On the other hand, such economic distress times demand Pakistanis to fulfil their obligations too. Non-Tax must be Taxed. Cooking oil, Tea, Food items, Branded luxuries are all imported. Why so? Pakistanis are to blame themselves for 7 decades of miseries and failures.
thumb_up Recommended (0)
TimeToMovveOn Nov 16, 2022 08:14pm
Once pakistan gets Kashmir, all these problems will be over.
thumb_up Recommended (0)
Concerned Nov 17, 2022 09:43am
@TimeToMovveOn, and there is lies the problem with Pakistan. Unable to run the parts you have under control, unable to develop the largest province Baluchistan after decades and yet Kashmir is held up as some sort of a savior? But what can be expected of a country and it’s people where everyone seems to have a solution for everything, yet still are unable to follow even the most basics of rules, I believe everyone feels they’re correct and they don’t need to change but have solutions for how others can change, the irony is unfathomable.
thumb_up Recommended (0)
Concerned Nov 17, 2022 09:45am
@Kashif ALI, in Pakistan, everyone feels they’re doing their part, it’s the next guy that needs to change not him. Once that mentality changes, we might see a fruitful future, until then, we seem to be evolving, only backwards though.
thumb_up Recommended (0)
samir sardana Nov 18, 2022 12:31am
IMF DELAY IS TACTIC TO COERCE GOP on some decisions - like subsidies etc) IT IS WORKING ! PKR IS FALLING ! THAT IS CASING DELAY IN REMITTANCES AND ALSO INFORMAL REMITTANCES - WHICH IS HITTING SBP USD RESERVES BUT THIS WILL PASS ! IT IS ALL A GAME OF TACTICAL NEGOTIATION ! ULTIMATELY IMF DEAL AND CASH WILL FLOW !IMF WANTS TO SQUEEZE THE MAXIMUM FOR ITS AID ! ONLY USD-PKR PUNTERS ARE HAPPY ! CDS MEANS NOTHING ! WHEN PUTIN WENT ON A TREK ,AND OIL WAS 120 AND GAS BLEW UP - WHEN THE PKR WAS AT 245 - WHAT WAS THE CDS ? WHAT IS THE CDS NOW ? IT IS A STAT NUMBER ? HOW MANY BUYERS STRUCK THE CDS SWAP,AT THE RATE, IN THE GRAPH ? CLOSE TO ZERO ! dindooohindoo THESE ARE ALL SCARE TACTICS, AND SOMEONE IS MAKING MILLIONS, IN THE USD-PKR TRADES
thumb_up Recommended (0)

Pakistan’s perceived default risk worsens 'owing to IMF uncertainty'

Stocks fall on noisy IMF humdrum

KP asks Wapda to pay Rs21bn

Afghan suppliers: Coal importers making ‘informal’ payments

Govt debt stocks hit historic high of Rs50.152trn

Petrol, diesel and LNG at discounted rates: Russian ministers due next month

Revolving fund account for CPEC IPPs approved: ECC allows import of 0.583MTs of wheat

Payables/receivables: Govt offered to seek resolution of dispute thru ICA, KE CEO tells Senate panel

Auditors’ appointment: SECP decides to take risk-based approach

New estimates place flood losses at $46bn

Afghanistan arrests ‘foreign IS member’ for embassy attack