Political unrest in Pakistan has increased the country’s default risk and is expected to lead to further decline in the bonds and currency of Pakistan

With the dissolution of National Assembly and Federal Government, the Threats of further destabilization of the economy are also vulnerable to the main financial package being negotiated with the International Monetary Fund. Investors fear that political infighting will distract officials from the growing current account deficit.

The country’s default risk according to five-year Credit defaults swaps, rose to its highest level since 2013 after nearly doubling in the last month. Pakistan’s U.S. dollar-denominated bonds maturing in December have fallen 5 percent this year, according to data compiled by Bloomberg.

The Credit Default Swap of Pakistan jumped to 1,000bps compared to 400bps few months back.

The continued depreciation of the currency pushed up import prices and contributed to the decline in annual inflation to 12.2% in February.

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