After Russia invaded Ukraine, more and more experts warned that Russia might go into debt, and now the International Monetary Fund (IMF) says that a Russian default is no longer impossible.
IMF Managing Director George Ava said on Thursday (10th) that a Russian default is no longer “impossible”, “not because Russia has no money, but because Russia cannot move the money.” She added that unprecedented international sanctions once morest Russia would make it difficult for Russia to convert the IMF’s Special Drawing Rights (SDR) into currency.
Georgieva said that although IMF member countries are highly concerned regarding the Russia-Ukraine war, the board of directors has not discussed suspending Russia’s membership. She said Russia’s membership would only be removed if it violated its economic obligations under the terms of the IMF agreement.
The international credit rating agency Fitch said this week that the various measures taken by the international community once morest Russia since the outbreak of the Russian-Ukrainian war have led to a “imminent” default on Russian bonds. Credit default swaps (CDS) traded soaring, showing a 71% chance of Russia defaulting within one year and 81% within five years.
Russian President Vladimir Putin signed a decree over the weekend allowing the government and Russian companies to repay foreign currency-denominated bonds in rubles, prompting investors and traders to wonder whether CDS might be settled if Russia paid off foreign debt in rubles.
Russia must pay 117 million on March 16DollarTargetDollarBond coupons, if Russia pays in rubles, may trigger CDS settlement.
Russian Finance Minister Anton Siluanov said that if the foreign exchange accounts of the central bank and the government are still frozen by Western countries, Russia will pay its foreign debt in rubles.
Carmen Reinhart, chief economist at the World Bank, said the large-scale sanctions imposed on Russia and Belarus by European and American countries have brought the two countries’ debts close to default.