Declining risk premiums open the door to global markets: Schehzad

ISLAMABAD: Khurram Schehzad, advisor to finance minister Wednesday said the decline in country risk premiums provides a timely opportunity for Pakistan to plan and re-enter global capital markets, particularly with global interest rates on the decline.

Lower borrowing costs and increased liquidity will help alleviate external pressures further, thereby strengthening Pakistan’s external position and boosting its economic prospects.

Pakistan’s Default Risk plummets as CDS Spread falls 93 per cent amidst improved economic outlook, he added.

Spread on Pakistan’s CDS (Credit Default Swap) - insurance against credit default risk, has fallen to a low of 505 bps (5.05 per cent) - even lower than some of the emerging and frontier markets, making a remarkable recovery of over 11,883 bps (11.89 per cent).

Pakistan’s five-year CDS spread has dropped from 12,388 bps in November 2022, indicating a significant reduction in default risk. Improved debt management, boosted foreign reserves, and fiscal discipline have restored market confidence in Pakistan’s ability to meet its sovereign obligations.

As investor confidence soars, Pakistan’s global bonds have been rallying, making creditors increasingly optimistic about Pakistan’s financial health, he added.

With its improved credit profile and favorable market conditions, Pakistan is now well-positioned to capitalise on this opportunity and attract credit and investment flows.

Copyright Business Recorder, 2024