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KARACHI: Pakistan’s risk of default, which is measured through the five-year currency default swap (CDS) index, on Wednesday spiked to a new high at 75%. Just on Monday this week, the CDS was 64%.
According to Arif Habib, Pakistan 5-Year CDS on Wednesday sharply rose by 1,929bps to 7,550bps by DoD.
It is pertinent to mention here that Pakistan is scheduled to repay $1 billion against a five-year Sukuk (Shariah-compliant bond) maturing on December 5, 2022. The yield (rate of return) on the Sukuk surged by 964 basis points in a day to 69.96%, according to Topline Research. The spike in the yield suggests that investors are thinking the country may default on the $1 billion Sukuk.
Reacting on news of default risk, the Governor of State Bank of Pakistan Jameel Ahmad had clarified that the country had foreign exchange reserves of “over $9 billion, which are more than enough” to pay for imports and repay foreign debt.
His views were seconded by Foreign Minister Bilawal, while inaugurating the Defense Exhibition IDEAS 2022 in Karachi the other day, that the country had got out of the default risk.
