A Russian default on its sovereign financial debts is no longer an “improbable event” after Western sanctions according to the head of the International Monetary Fund (IMF) Kristalina Georgieva on March 13.
“In terms of servicing debt obligations, I can say that no longer we think of Russian default as improbable event,” Georgieva said on CBS’s “Face the Nation.”
“Russia has the money to service its debt, but cannot access it,” Georgieva said, noting that sanctions imposed by the West against Russia have already had a “quite severe” impact on its economy.
“We expect a deep recession in Russia, and this abrupt contraction is affecting already how the Russian population is taking the heat on them. The ruble depreciated significantly. What does it mean? Real incomes have shrunk. Purchasing power of the Russian population has significantly diminished,” the IMF head said.
Russian Finance Minister Anton Siluanov informed state-run media March 13 that around $ 300 billion of Russia’s financial exchange and holdings have actually been seized due to the sanctions from Western nations including the United States, the European Union, the United Kingdom, and a number of other nations in response to Russia’s illegal invasion of Ukraine.
Those sanctions have targeted Russia’s economic, power, and also transport field, along with its export controls and also visa plan, banning items and freezing assets.
#UPDATE The IMF expects to cut its global growth estimate due to the economic damage caused by Russia's invasion of Ukraine, Managing Director Kristalina Georgieva said https://t.co/0eIsuXMPQh pic.twitter.com/hayOU1nUU8
— AFP News Agency (@AFP) March 10, 2022
Complying with mounting pressure from lawmakers, Joe Biden revealed on March 8 that the United States would suspend imports of Russian oil, stopping approximately 500,000 barrels each day of new crude shipments from entering American ports contributing to the already severe pain at the American pump.
“We have a total amount of reserves of about $640 billion, about $300 billion of reserves are now in a state in which we cannot use them,” Siluanov said of Russia’s financial situation.
The Russian economy might see still more damage as a result of increased pressure from the West on China not to provide it with the monetary assistance it requires, Siluanov included.
“We have part of our gold and foreign exchange reserves in the Chinese currency, in yuan. And we see what pressure is being exerted by Western countries on China in order to limit mutual trade with China. Of course, there is pressure to limit access to those reserves,” he said.
Amidst the strict sanctions, Moscow has threatened to repay global bondholders in rubles, something that Siluanov claimed was “absolutely fair.” in spite of the spiraling value of the ruble.
Russia is scheduled to pay $ 117 million on 2 dollar-denominated bonds on March 16. If it does not pay, it will have a 30-day grace period to do so prior to being technically in default.
Georgieva informed CBS on Sunday that the IMF was worried regarding the considerable spillover results that the war in Ukraine and subsequent sanctions on Russia might have on neighboring countries that have solid professional relations with both Russia as well as Ukraine, as well as the remainder of the world.
“What we are mostly concerned about are the immediate neighbors of Russia and Ukraine, the Central Asian republics, the Caucasus, Moldova,” Georgieva said, adding that the organization was also worried about the increasingly large number of Ukrainians fleeing the conflict, “that is of the order of magnitude of what happened in the second world war.”
Beyond both of the countries’ direct next-door neighbors, Georgieva stated the IMF is likewise worried about increasing inflation rates in nations that are yet to recover from the recession imposed on them by the COVID-19 panic, as well as those that are based on energy imports or subsidies from Russia.
When asked if a Russian default on its sovereign financial debts might establish an international monetary dilemma, Georgieva said, “For now, no.”
“When you look at the total exposure of banks to Russia, it is about $120 billion. Not negligent, but definitely not systemically relevant. And to what we are also seeing is that while inevitably we are going to downgrade our growth projections for 2022, it is still going to be a positive growth rate.”
Georgieva said on March 10 that the IMF would downgrade its previous forecast for 4.4 percent international economic growth in 2022 due to the Russian– Ukrainian war.
This would be the first default on Russia’s financial obligation since the last that struck 1998 when the nation experienced a monetary collapse.
Siluanov rejected reports that Putin’s government could skip on its repayments today, saying in a March 14 statement that “claims that Russia cannot fulfill its sovereign debt obligations are untrue,” adding that the country has “the necessary funds to service our obligations.”
H/T The Epoch Times
