Pakistan ranked among top emerging economies

Pakistan has been ranked among the world’s top emerging economies following a significant drop in its default risk in a major boost to investor sentiment and international credibility.

According to a new report by the globally renowned financial data agency Bloomberg, Pakistan’s probability of default has declined from 59% to 47% over the past 12 months - a notable improvement of 1100 basis points.

The report highlights Pakistan’s growing economic stability and successful financial reforms as key factors behind this improvement. Bloomberg attributes the positive shift to enhanced investor confidence, improved foreign exchange reserves, successful negotiations with the International Monetary Fund (IMF), and increased efforts to boost revenue through domestic reforms.

Pakistan’s inclusion at the top of Bloomberg’s list of emerging economies reflects a strong endorsement of the government’s recent economic measures. The report states that credit rating upgrades and strengthened relations with international financial institutions have contributed to a more stable outlook, encouraging global investors to re-engage with Pakistan.

“Pakistan’s significant reduction in default risk sends a powerful message to the global financial community,” the report noted. “It is a major milestone on the country’s path to economic recovery.”

Bloomberg’s data also compared Pakistan’s performance with other emerging economies. Countries like Argentina, Tunisia, and Nigeria saw modest improvements in their default risk (falling by -7%, -4%, and -5%, respectively), while others, such as Turkiye, Ecuador, Egypt, and Gabon, remain in the high-risk category. Pakistan’s improved economic outlook has also been supported by a gradual rise in remittances and exports, both key components of the country’s external financial health.

The default probability down from 59pc to 47pc, a massive 1,100 basis points improvement. This marks the sharpest decline among major emerging markets, ahead of Argentina (-7%), Tunisia (-4%), and Nigeria (-5%). In contrast, countries like Turkey, Ecuador, Egypt, and Gabon have seen their default risks rise.

This sharp decline in Pakistan’s risk signals renewed investor confidence-fueled by macroeconomic stabilization, structural reforms, successful IMF engagement and timely debt repayments and improved credit outlooks by S&P, Fitch, and others rating agencies.

Separately, Pakistan’s economy is likely to expand 2.7 per cent in the fiscal year ending June 2025 after growing 2.5 per cent during the previous year, the government’s economic survey showed recently, a day before the country’s federal budget is unveiled. The government initially targeted 3.6 per cent GDP growth, but lowered it to 2.7 per cent last month. The IMF expects real GDP to grow by 2.6 per cent in FY25 and for the economy to grow 3.6 per cent in FY26. Prime Minister Shehbaz Sharif’s government aims for 4.2 per cent GDP growth next year, the country’s planning minister said last week, amid competing priorities, including stimulating investment, maintaining a primary surplus, and managing defence expenditure amid heightened tensions with India.

Agencies