Pakistan leads emerging markets in sovereign risk recovery, says Bloomberg Intelligence

In a positive development on the economic front, Pakistan has emerged as the most improved emerging market in terms of sovereign credit risk, according to the latest analysis by Bloomberg Intelligence.

Backed by macroeconomic stabilization, structural reforms, and successful engagement with the International Monetary Fund (IMF), the country has recorded the sharpest decline in default risk globally over the past year—signaling renewed investor confidence and growing financial credibility, said Khurram Schehzad, Advisor to Pakistan’s Finance Minister, in a post on social media platform X Saturday.

“As per the latest data posted by Bloomberg Intelligence, Pakistan stands out globally as the most improved economy in terms of reduction in sovereign default risk, as measured by Credit default swaps (CDS)-implied probability.

“Pakistan topped Global EM Rankings in default risk reduction, as the country has recorded the largest drop in sovereign default risk globally over the last 12 months,” said Schehzad.

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.

Citing Bloomberg Intelligence data, default probability was down from 59% to 47%, an 11 percentage point improvement, said Schehzad.

“This marks the sharpest decline among major emerging markets, ahead of Argentina (-7%), Tunisia (-4%), and Nigeria (-5%). In contrast, countries like Turkey, Ecuador, Egypt, and Gabon have seen their default risks rise.”

Schehzad was of the view that the decline in Pakistan’s risk signals renewed investor confidence—fueled by “macroeconomic stabilisation, structural reforms, successful IMF engagement and timely debt repayments, and improved credit outlooks by S&P, Fitch, and others”.

“Pakistan is not only back on the map—it is moving forward with stability, credibility, and reform at its core,” he said.