Russia’s Debt Default No Longer “Improbable”, Says IMF Director | Russia

A Russian default on its debts after Western sanctions for its invasion of Ukraine is no longer “unlikely”, but would not trigger a global financial crisis, the head of the International Monetary Fund said on Sunday.

The managing director of the Washington-based fund, Kristalina Georgieva, said sanctions imposed by the United States and other countries were already having a “serious” impact on Russia’s economy and would trigger a deep recession there this year. The war in Ukraine will also drive up food and energy prices, leading to hunger in Africa, she added.

Georgieva told CBS’s Face the Nation: “In terms of debt service, I can say that we no longer view Russia’s default as an unlikely event. Russia has the money to service its debt, but does not have access to it. What worries me the most is that there are consequences that go beyond Ukraine and Russia.

Last week, the World Bank’s chief economist, Carmen Reinhart, warned that Russia and its ally Belarus were “very close” to default.

When asked if a default by Russia could trigger a financial crisis in the world, Georgieva replied: “At the moment, no.” The banks’ total exposure to Russia was about $120 billion, an amount that, while not insignificant, was “not consistently relevant”, she said. Last week, she said the IMF would cut back its previous forecast of 4.4% global economic growth in 2022 because of the war.

Separately, Russia said on Sunday it counted on China to help it weather the blow to its economy from the sanctions, but the United States warned Beijing not to provide such support. Russian Finance Minister Anton Siluanov said Moscow was unable to access $300 billion of its $640 billion in gold and currency reserves, but still held some of its reserves in the Chinese currency, the yuan.

“And we see how much pressure Western countries are exerting on China to limit mutual trade with China. Of course, there are pressures to limit access to these reserves,” he said.

“But our partnership with China will always allow us to maintain the cooperation we have achieved, and not only to maintain it, but also to increase it in an environment where Western markets are closing.”

Russia is due to make two interest payments on March 16. However, he will have a grace period of 30 days to make the coupon payments.

Siluanov said on Sunday that it would be “absolutely fair” for Russia to make sovereign debt payments in rubles until its foreign exchange reserves are unfrozen, according to Interfax.

The IMF chief expressed concern about the fallout from the war on immediate neighbors Russia and Ukraine, as they have close trade relations with both countries, and the large number of Ukrainians fleeing the conflict, the largest refugee crisis in Europe since World War II. war.

The IMF is also “very concerned” for countries that have yet to recover from the Covid-induced economic crisis, which will be hit hard by soaring wheat and other commodity prices. “For them, this shock is particularly painful,” Georgieva said. Other countries are very dependent on energy imports from Russia.

“Yes, the war in Ukraine means hunger in Africa, but the war in Ukraine also has social implications for many, many countries across all three channels,” she said. “First, commodity prices, energy, grains, fertilizers, metals…the impact that has on inflation and in countries where inflation has been high before, it’s dramatic. ” Georgieva cited Brazil and Mexico as examples. The surge in inflation will force the authorities to tighten financial conditions, which will aggravate the difficulties of the population.

However, economic growth remains robust in countries like the United States that have recovered quickly from the pandemic, she told CBS.