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% on Monday 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% in January 2021.
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.
Yields (rate of return) on the $1 billion international bond (Sukuk), which is maturing on December 5, 2022, soared to 120% on Monday from around 96% on Friday, indicating the investors’ lack of confidence in Pakistan whether it would be able to repay the maturing debt.