Foreign exchange reserves rise to over $12 billion in December 2024
\n KARACHI
\nPakistan\u2019s perceived risk of default has sharply declined, as reflected by the 88% fall in its five-year credit default swap (CDS) spreads to 1,493 basis point (bps) since their peak in November 2022, says brokerage firm Topline Securities.
\nIt adds that the improvement comes on the back of stabilising macroeconomic indicators and a healthier external account. Foreign exchange reserves have risen to over $12 billion in December 2024, a significant recovery from the precarious low of $2.9 billion in February 2023.
\nBut what does this mean for the country? Karim Punjani \u2014 ex equities and treasury fund manager \u2014 said that Pakistan\u2019s high CDS spreads are not an anomaly, adding that the COVID-19 pandemic affected all economies, and the CDS spreads of almost all countries shot up.
\nWhat is unique for Pakistan is \u201cpolitical concerns\u201d that further exacerbated the issue.
\nFormer finance minister Miftah Ismail, whose second term in office was when Pakistan was battling with the risk of default, said that \u201cit is great that the risk has come down so much. And I hope it stays down.\u201d
\nHe said that a cursory look at the overall trajectory of the CDS spreads will help analyse what sort of policies the market demands.
\nGiving support to Punjani\u2019s claims of political concerns, Ismail said that the risk shot up in October 2022 at a time when he was made to leave his office. It was the same time, he said, when now-deputy minister Ishaq Dar openly expressed his disagreements with the IMF.
\n\u201cThe risk decreased in June\/July 2023 when Pakistan finally got an agreement with the IMF. Then the risk further declined in January\/February 2024 and has stayed low since,\u201d he said, adding that the period reflected that Pakistan \u201cwill have understanding with the IMF\u201d.
\nIn his post on X, Khurram Schehzad, adviser to the finance minister, said: \u201cThe decline in country risk premiums provides a timely opportunity for Pakistan to plan and re-enter global capital markets, particularly with global interest rates on the decline. Lower borrowing costs and increased liquidity will help alleviate external pressures further, thereby strengthening the country\u2019s external position and boosting its economic prospects.\u201d
\nPunjani added that there is still room for improvement since the CDS spreads have not yet reached pre-COVID levels. Then he said, it would be around \u201c400-450bps\u201d. On the current scenario, he said, \u201cthis means that while there are still some structural issues, the situation is not as bad as it was when the country was facing a political turmoil.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Foreign exchange reserves rise to over $12 billion in December 2024 KARACHI Pakistan\u2019s perceived risk of default has sharply declined, as reflected by the 88% fall in its five-year credit default swap (CDS) spreads to 1,493 basis point (bps) since their peak in November 2022, says brokerage firm Topline Securities. It adds that the improvement […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-451700","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"\n