Key takeaways
- Pakistan's credit default swap spread fell about 2,200 basis points from above 4,500.
- The improvement is a base effect from near-default, not stronger fundamentals.
- IMF support, foreign deposits and import controls drove the change.
- External debt remains above US$130 billion and exports remain narrow.
- Markets have given Pakistan time, not trust.
In this Minute Mirror column (October 2025), Dr. Ghulam Mohey-ud-din looks behind the celebration of Pakistan’s improved position in Bloomberg’s sovereign risk rankings.
The argument
The headline figure is real. Pakistan’s credit default swap spread, a market measure of default risk, fell by about 2,200 basis points from levels above 4,500 in mid-2023, according to Bloomberg Intelligence data reported in Pakistani media. The column argues that the improvement looks dramatic mainly because the starting point was so distressed. It is a base effect.
The drivers were crisis management rather than reform: the US$3 billion IMF stand-by arrangement of July 2023, deposits from friendly countries and import controls. These eased liquidity but did not change productivity, institutions or the export base. Bloomberg’s measure captures relative improvement in perceived default risk, not absolute economic strength or competitiveness.
The structural weaknesses remain. External debt is above US$130 billion, inflation remains a pressure and exports are concentrated in a few low-value sectors. Market calm signals temporary breathing room from cash injections, not confidence in long-term solvency. The author warns against using favourable rankings as political validation in place of reform in taxation, energy and exports. As he puts it, Pakistan has bought time, not trust.
What needs to change
- Broaden the tax base instead of deepening debt.
- Rationalise energy pricing rather than subsidising inefficiency.
- Build value-added exports rather than defending a weak currency.
- Move from crisis management to a strategy for long-term competitiveness.