Barclays Maintains Positive Outlook on Pakistan’s Sovereign Bonds Amid Uncertainty

Barclays retains its overweight rating on Pakistan and recommends buying on weakness as the new government is unlikely to default on its Eurobonds. In a note, Barclays highlighted Pakistan’s improved foreign reserves and assessed the risk of repayment as low, despite the country’s efforts to secure a new loan from the International Monetary Fund (IMF). A credit strategist at Barclays in Singapore emphasized that while political noise may persist, the risk of repayment is unlikely to increase due to the improved foreign reserves. The analyst said for a Sharif-led government, the agency expects the initial 12 months after elections to be less disruptive. On the other hand, a PTI-backed government would likely prioritize its political agenda over economic issues. Barclays expressed confidence that the Pakistani government will continue to meet its obligations on Eurobonds, although it warned that bonds will react negatively if election results are dismissed but stabilize if a caretaker government is installed. Despite challenges, Barclays suggested buying Pakistani bonds during the dip.