The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, ruled out this Sunday that “a Russian sovereign default is no longer unlikely, although it is unlikely to trigger a global financial crisis,” according to the Bloomberg agency.
In a report to the CBS network, Georgieva pointed out in Washington that “Russia has the money to pay its debt, but it cannot access it. In terms of servicing debt obligations, I can say that we no longer think of a Russian default as an unlikely event.”
Russia and Russian banks under the sanctions of the United States and other allied countries as a result of the large-scale invasion of Ukraine, Russia’s credit rating has faced downgrades. Fitch Ratings said last week that a bond default is “imminent” as a result of measures imposed since the war in Ukraine began on February 24.
When asked if Russia’s financial tightening could cause a global financial crisis, the IMF’s managing director responded: “For now, no. Banks’ global exposure to Russia is “definitely not systemically relevant.”
Georgieva anticipated that “although the IMF will inevitably lower its growth outlook for 2022, it will remain a positive growth rate.”
While, Russian Finance Minister Anton Siluanov argued that “Russia has already lost access to almost half of its reserves and sees more risks for President Vladimir Putin, due to increased Western pressure on China.”
“The total volume of our reserves is about $640 billion, and about $300 billion is in such a condition that we cannot use it now,” he told state television in an interview on Sunday.
“We see the pressure that Western countries put on China” to limit access to yuan reserves, but I believe that our partnership ties with China will allow us not only to preserve them, but also to expand them,” Siluanov said.
The asset freeze at Russia’s central bank was imposed as part of a series of economic sanctions to punish Moscow. for the invasion of Ukraine, now in its third week.
Russia’s own data released in January shows that some $100 billion of reserves were held in US currency as of June, accounting for 16.4% of total cash at the time.
Euro holdings were 32.2% and yuan holdings 13.1% at the end of June 2021.
China has promised to continue normal trade relations with Russia, considered a strategic partner, despite the business exodus of many European and US companies.
China’s move to double the yuan’s trading range for the ruble showed little sign of boosting activity in the pair, with liquidity tightening further on Friday.
The Russian minister said that “Moscow will pay the debt in rubles until its cash pile is unfrozen.”
The Bank of Russia introduced capital controls after international governments froze their foreign reserves. The restrictions have raised the possibility of the nation’s first debt default since 1998.
The central bank will also keep the stock market on the Moscow Stock Exchange closed until at least March 18, extending a record shutdown intended to protect domestic investors from the impact of harsh sanctions over Russia’s invasion of Ukraine.
Siluanov promised to continue helping Russian banks that are in a difficult situation. The current level of reserves allows even banks to function “which have become the subject of the harshest sanctions.”
