Pakistan’s risk of default rises as bond yields spike

This spike suggests an elevated risk of default on foreign debt repayment for the country

Karachi: The yield on Pakistan’s US dollar-denominated bond experienced a significant surge, climbing 73 basis points to 106.37 per cent in the international market on Monday.

This spike suggests an elevated risk of default on foreign debt repayment for the country, The Express Tribune reported.

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The increase in bond yields reflects the return of volatility in Pakistan’s global bond market. Uncertainty looms over whether Islamabad will succeed in reviving the International Monetary Fund’s (IMF) $6.7 billion loan programme and meet international payment obligations beyond June 2023, The Express Tribune reported.

The yield on the 10-year Pakistan Government International Bond, valued at $1 billion and maturing on April 15, 2024, has seen a cumulative increase of 30.60 percentage points in the past five months.

Similarly, the yields on six other Pakistani global bonds, maturing at different times until April 2051, also experienced surges ranging from 10 to 39 basis points. One bond, maturing in January 2029, saw a recovery of 6 basis points.

Prior to the outbreak of Covid-19 in Pakistan in February 2020, bond yields were around 8-10 per cent.

Pakistan’s Finance Minister Ishaq Dar’s assurance last week that the country had made arrangements to repay foreign debt worth $3.7 billion until the end of June 2023 did not alleviate concerns.

Moody’s Investors Service raised the alarm, stating that Pakistan could default without the IMF loan programme after June 2023 given its weak reserves, The Express Tribune reported.