What if Pakistan exits its IMF program and defaults?
Pakistan exhausting IMF tranches and defaulting forces a Paris Club restructuring; the global read is a small risk-off blip in VIX and HY. Sri Lanka's 2022 default is the regional template and it stayed contained to local assets and bilateral (China/IMF) creditors. The key transmission is to China as the dominant bilateral lender setting restructuring terms; US equity/Nasdaq drawdowns here are too large for a sub-scale frontier default.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Islamabad exhausts IMF tranches and defaults on external debt, forcing a disorderly Paris Club restructuring. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Geopolitical risk ▲ — which propagate through our causal graph to the markets below.