Russia’s default for sovereign debt is no longer an “unlikely event”

The International Monetary Fund (IMF) Prime Minister Christalina Georgieva said on March 13 that Russia’s default on sovereign debt is no longer an “unlikely event” after Western sanctions.

“From a debt repayment perspective, we can say that Russia’s default is no longer considered an unlikely event,” Georgieva said. Said About CBS’s “Face the Nation”.

“Russia has the money to repay its debt, but it has no access to it,” said Georgieva, and the sanctions imposed by the West on Russia have already had a “quite serious” impact on its economy. Said that.

“We anticipate a serious recession in Russia, and this sudden contraction has already affected the way the Russian population is enthusiastic about them. The ruble has fallen sharply. What does that mean? Real income has shrunk. The purchasing power of the Russian people has declined significantly. “

Russia’s Finance Minister Anton Siluanov held about $ 300 billion in Russia’s foreign exchange and holdings against state media on March 13, under sanctions from the United States, the European Union, the United Kingdom and several other countries. He said things were confiscated. Russia invades Ukraine.

These sanctions cover Russia’s financial, energy and transportation sectors, and their export control and visa policies, banning products and freezing assets.

President Joe Biden said on March 8 that the United States would stop importing Russian oil and stop about 500,000 barrels of new crude oil from entering the United States per day after heightened pressure from legislators. Announced.

“We have about $ 640 billion in reserves, and about $ 300 billion in reserves are currently in a state where we can’t use them,” Siranov said of Russia’s financial situation.

Siranov added that Russia’s economy could be even more affected as pressure from the West not to provide China with the necessary financial support.

Epoch Times Photo
People lined up outside the branch of Sberbank, Russia’s state bank, withdrew their savings on February 25, 2022, and closed their Prague account. After that, Sberbank closed all branches in the Czech Republic. (Michal Cizek / AFP via Getty Images)
Epoch Times Photo
President Joe Biden will announce sanctions against Russia from the White House’s East Room on February 22, 2022, and will talk about trends in Ukraine and Russia. (Drew Angerer / Getty Images)

“We hold some of our gold and foreign exchange reserves in RMB in Chinese currency, and what pressure Western countries are putting on China to limit mutual trade with China. Of course, there is pressure to limit access to these reserves, “he said. Said..

Under strict sanctions, Moscow threatened to repay international bondholders in the ruble. Siranov said it was “absolutely fair.”

Russia will pay $ 117 million With a $ 2 bond on March 16th. However, if you do not pay, there is a 30-day grace period before it becomes technically the default.

Georgieva told CBS on Sunday that the war in Ukraine and the consequent sanctions on Russia could be significant to both Russia and Ukraine and to neighboring countries with strong trade relations with other parts of the world. He said he was concerned about the spillover effect.

“We are most concerned about Russia and Ukraine, right next to Russia and Ukraine, the Central Asian Republic, the Caucasus and Moldova,” said Georgieva, who is also worried that the organization will increase the number of Ukrainians fleeing conflict. Added. It’s about the same size as what happened in World War II. “

Georgieva said that beyond the neighbors of both countries, the IMF has not yet recovered from the economic crisis caused by the COVID-19 pandemic, and the level of inflation in countries that rely on energy imports from Russia. He said he was also concerned about the rise. ..

But when asked if Russia’s sovereign debt default could cause a global financial crisis, Georgieva said, “No, for now.”

“The total bank exposure to Russia is about $ 120 billion. It’s not a mistake, but it’s definitely not systematically relevant. And while it inevitably downgrades its growth forecast for 2022, it’s still We also know that it will have a positive growth rate. “

Georgieva announced on March 10 that the IMF will downgrade its previous forecasts. 4.4 percent World economic growth in 2022 due to the Russia-Ukraine War.

This will be the first default of Russia’s debt since 1998, when the country experienced a financial crisis.

Siranov dismissed a report on March 14 that the country could neglect to pay this week. statement “It is a mistake to claim that Russia cannot meet its sovereign debt,” he added, adding that the country has “the money needed to meet our obligations.”

Catabella Roberts


Katabella Roberts is a reporter currently based in Turkey. She focuses primarily on the United States and covers the news and business of The Epoch Times.