Pakistan’s default risk has increased sharply amid political turmoil and uncertainty about talks with the International Monetary Fund (IMF), reports said.
The country’s default risk was measured by five-year credit-default swaps (CDS), insurance contracts that protect an investor against a default, The credit-default swaps increased and reached 75.5 per cent on Wednesday from 56.2 per cent, The increase in the CDS shows a ‘grave situation’ making it extremely difficult for the government to raise foreign exchange from markets through bonds or commercial borrowings. Pakistan needs USD 32 billion to USD 34 billion this fiscal year to meet its foreign obligations. According to financial experts, Pakistan still requires about USD 23 billion in the remaining fiscal year. It continues to remain in the IMF programme which allows it to get inflows from the World Bank, Asian Development Bank and Asian Infrastructure Bank. Pakistan had told IMF that it would reduce the fiscal deficit by Rs 1500 billion in the current fiscal year.