Pakistan’s risk of default has worsened as the five-year credit default swap (CDS) surged by 30 percentage points in a week to 93%, suggesting that the country lacked resources to meet the growing import payments and foreign debt repayments on time. A financial market expert said, “Uncertainty pertaining to the ninth IMF review is driving this sentiment.”

Foreign Exchange Reserves are Depleting

The spike in the report coincides with the SBP-held declining foreign exchange reserves, depleted to a critically low level of $8 billion against over $20 billion in August 2021. Arif Habib Limited Head of Research Tahir Abbas hoped that Pakistan would receive billions of dollars in loans from the multilateral and bilateral creditors that would help avert the situation. He said, “Pakistan is expected to receive $6 billion to $8 billion from the IMF, World Bank, Asian Development Bank (ADB), Saudi Arabia, and in flood relief.”

Responding to the situation, the ex-finance minister, Shaukat Tarin, said that the PTI-led government had left CDS at less than 5%in March. However, the current government has made matters worst due to the inept handling of the economy. “PDM govt which came to fix the economy has taken it to 75%,” he added.

Finance Minister Refutes Rumours of Pakistan Being at the Risk of Default

Ishaq Dar has dispelled the rumors related to Pakistan’s default risks, terming them the “PTI’s propaganda” for mere politicking. He said that Pakistan would not seek an extension in the payment of a $1 billion Sukuk bond due in December, and it would be paid in full without any delays. The planning minister, Ahsan Iqbal, said, “The news about Pakistan’s default risk is based on a malicious campaign initiated by the PTI which has no reality.” He further added; “The PTI destroyed the country’s economy which led to an economic crisis but the incumbent government has improved the economy by following the agreement with the IMF.”

Also read: Pakistan’s Default Fear Spikes Over UN Report of Debt Restructuring

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