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.
