Wednesday, May 21, 2025

Pakistan’s Economy Revival-Foreign Reserves Hit $12B, Default Risk Drops 88%

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In a significant turnaround, Pakistan’s economy has gained substantial momentum with foreign exchange reserves climbing to over $12 billion in December 2024.

This surge marks a remarkable recovery from a low of just $2.9 billion in February 2023, signaling a brighter economic future for the country.

The country’s improved financial standing is largely attributed to stabilizing macroeconomic indicators and a healthier external account. Moreover, Pakistan’s risk of default has drastically diminished, with its five-year credit default swap (CDS) spreads plunging by 88% from their peak in November 2022.

Former finance minister Miftah Ismail emphasized that the drop in default risk is a clear indication of Pakistan’s positive economic trajectory, particularly following its agreement with the IMF.

Experts suggest that the declining CDS spreads open up opportunities for Pakistan to re-enter global capital markets, lowering borrowing costs and boosting liquidity in the process. While there’s still room for improvement, the country is on a promising path toward greater financial stability.

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