Islamabad, Oct 26 (SocialNews.XYZ) The cost of insuring Pakistans sovereign debt against default climbed to a 13-year high as ratings downgrades and speculations of debt restructuring raised concerns among international investors about the countrys ability to meet its bond obligations.
On October 24, Pakistan's benchmark five-year credit default swap (CDS) increased by 3,071 basis points day-on-day to 52.8 per cent -- the highest level since November 2009, The News reported citing data from the Arif Habib Limited.
The yields on Pakistan's dollar-denominated bonds continued to rise. This showed that the investors were worried that the nation would miss its obligation to repay credit holders $1 billion because the Sukuk is due to mature on December 5.
Explaining the reasons for a surge in the CDS and bonds' yields, a former central bank governor said there were a number of factors responsible for this, The News reported.
"The country is facing a serious balance of payments situation with the State Bank of Pakistan's reserves covering less than one month's imports. Besides, there is not only the economic 'uncertainty' but also domestic instability and uncertainty, which are not liked by the capital markets," he said.
Other factors include the recent downgrades by Moody's and Fitch, global rise in interest rates, particularly the Federal Reserve that strengthens the US dollar and weakens the rupee, and the overall geopolitical turbulence and supply chain disruptions that hit the commodity futures market and put more pressure on our import bill, The News reported.
"Put all this together and you have a can of worms we currently face that elevates rumours of a potential default... that I personally believe will not happen," he added.
Source: IANS
About Gopi
Gopi Adusumilli is a Programmer. He is the editor of SocialNews.XYZ and President of AGK Fire Inc.
He enjoys designing websites, developing mobile applications and publishing news articles on current events from various authenticated news sources.
When it comes to writing he likes to write about current world politics and Indian Movies. His future plans include developing SocialNews.XYZ into a News website that has no bias or judgment towards any.
He can be reached at gopi@socialnews.xyz