Pakistan was on the verge of default earlier this year, but they recovered. Currently, the risk of default is increasing due to a failure to repay foreign debt.
On Monday, Pakistan’s five-year currency default swap (CDS) index rose by 4.2 percentage points to a new high of 64.2%.
The main reason is that the country is unable to make increasing import payments and timely debt payments.
Pakistan is expected to repay $1 billion in relation to a five-year Sukuk (a Shariah-compliant bond) that expires on December 5, 2022.
Investors may be worried that the country will be unable to repay the $1 billion Sukuk.
However, SBP Governor Jameel Ahmad clarified another day that the country had sufficient foreign exchange reserves to cover both imports and foreign debt.