Investor fears over the risk of many emerging market countries’ defaulting on their debt has risen sharply as Iceland’s financial collapse has hit sentiment, discouraging funds from investing in these economies.
The market is pricing the risk of default for countries such as Pakistan, Argentina, Ukraine and Iceland at 80 per cent or higher as the banking systems of these countries come under increasing pressure due to the credit crisis.
Trading in credit default swaps – a form of insurance against bonds’ defaulting – indicates expectations that Pakistan has a 90 per …