November 22, 2022
2 mins read

Is Pakistan on the verge of default?

A section of global and local experts and bond investors saw the rise in the CDS as a threat to their receivables…reports Asian Lite News

The perception of Pakistan’s risk of default has worsened with the five-year credit default swap (CDS) surging by 30 percentage points in a week to 93 per cent ahead of the repayment of $1 billion for a maturing international bond early next month.

According to a research house, the CDS had been at 4.2 per cent in January 2021, The Express Tribune reported.

Finance Minister Ishaq Dar and many financial experts have reiterated that Pakistan will not default on any of the international payments and that volatility in the CDS had nothing to do with the country’s default risk.

However, a section of global and local experts and bond investors saw the rise in the CDS as a threat to their receivables, The Express Tribune reported.

Yields (rate of return) on the $1 billion international bond (Sukuk), which is maturing on December 5, soared to 120 per cent on Monday from around 96 per cent on November 18, indicating the investors’ lack of confidence in Pakistan whether it would be able to repay the maturing debt.

The yield was hovering at less than 10% before the Covid-19 outbreak in February 2020 in Pakistan, when the investors had high confidence in Pakistan’s capacity to repay them.

The developments came amid a delay in the ninth review of Pakistan’s economy by the International Monetary Fund (IMF), which partly blocked the foreign currency flows into the country.

Accordingly, the foreign exchange reserves depleted to a critically low level of $8 billion against over $20 billion in August 2021, weakening the country’s capacity to make international payments, Express Tribune reported.

Arif Habib Limited Head of Research Tahir Abbas said that the “CDS is a premium that investors pay to insure their investment in bonds against the risk of default”.

“This, however, should not be taken as an indicator of the risk of default.”

Current account deficit narrows 68%

The State Bank of Pakistan (SBP) said the country’s current account deficit decreased 68 per cent in October from a year earlier owing to decline in imports.

In a statement on Monday, the SBP said the current account deficit was $0.57 billion in October compared with a deficit of $1.78 billion in the same month last year, reports Xinhua news agency.

During the first four months (July-October) of fiscal year 2022-2023, the current account deficit was $2.8 billion, down from $5.3 billion in the corresponding months of the last fiscal year, the figures showed.

Imports fell by $2.7 billion in the first four months of the current fiscal year, and exports increased by $0.2 billion compared to July-October of the previous fiscal year, said the statement.

As per the monetary policy, the bank expects the current account deficit to remain at 3 per cent of gross domestic product during the current fiscal year.

ALSO READ: PERILS OF PAKISTAN: With new COAS, the army will rule Pak politics

Previous Story

Will India leave a mark as G20 chair?

Next Story

Foreign firms in China on verge of closure

Latest from -Top News

Pakistan FM Due in Bangladesh

During his visit Dar will hold discussions with the Foreign Affairs Advisor Towhid Hossain and also call on Muhammad Yunus…reports Asian Lite News Pakistan’s Deputy Prime Minister and Foreign Minister Ishaq Dar

Balochistan: Where the State Makes People Disappear

The victims include students, journalists, and peaceful protesters, many of whom were abducted from cities such as Karachi and Islamabad….reports Asian Lite News A human rights organisation on Monday revealed that 785

Monsoon Havoc in Pakistan

Since June 26, torrential rains have killed at least 299 people—including 140 children—and injured 715 in Pakistan…reports Asian Lite News Since June 26, torrential monsoon rains have devastated Pakistan, killing at least

Bangladesh’s Dark Turn

With the Awami League outlawed and absent from the electoral fray, a vacuum has emerged — one that has not necessarily been filled with stability….reports Asian Lite News Bangladesh’s political landscape has
Go toTop

Don't Miss

Pakistan, Iran, China Plan Trilateral Defence Talks

It should be noted that the upcoming trilateral consultation would

Shehbaz to meet Xi, CPEC expansion on agenda

Shehbaz Sharif is among the first batch of foreign leaders