ISLAMABAD: The risk of default of Pakistan, calculated by the 5-year credit default swap (CDS) spiked by 3.07 percentage points on Tuesday, hitting a 13-year high at 52.8%.
Before the outbreak of Covid pandemic in Feb 2020, the CDS fluctuated around 5% to 6%.
Nonetheless, the CDS hit the peak of 30% in middle of 2022 because of an uncertainty about the resumption of of the International Monetary Fund (IMF) loan programme.
After the resumption of IMF loan, the CDS slightly recovered, but these days
However, these days it is again surging rapidly, indicating foreign investors lack of confidence in repayment of loans by Pakistan.
Pakistan is scheduled to repay $1 billion to the foreign investors against the the 5-year Sukuk maturing on Dec 5, 2022.
The yield (rate of return) on the 5-year Third Pakistan International Sukuk remain high around 145% these days. It hovered below 10% before the Covid-19 pandemic.
The yield on the bonds maturing in 2024 and 2025 also stands high at 90% and 57.5%, respectively these days, compared with below 10% in the past.
The foreign investors have panicked after the central bank’s reserves fell to $7.6 billion in Oct against $10 billion in Sept when IMF released $1.1 billion tranche.
