Russian default on debts no longer ‘improbable’, says IMF head
A Russian default on its debts after western sanctions over its invasion of Ukraine is no longer ‘improbable’, but would not trigger a global financial crisis, the head of the International Monetary Fund said on Sunday.
The Washington-based fund’s managing director Kristalina Georgieva said the sanctions imposed by the United States and other nations were already having a “severe” impact on the Russian 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” programme: “In terms of servicing debt obligations, I can say that no longer we think of Russian default as an improbable event. Russia has the money to service its debt, but cannot access it. What I’m more concerned 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 “mightily close” to default.
Asked whether a Russian default could trigger a financial crisis around the world, Georgieva said, “For now, no.” The total exposure of banks to Russia amounted to around $120bn, an amount that while not insignificant, was “not systematically relevant,” she said. Last week, she said the IMF would downgrade its previous forecast for 4.4% global economic growth in 2022 as a result of the war.
Separately, Russia said on Sunday that it was counting on China to help it withstand the blow to its economy from sanctions, but the US has warned Beijing not to provide that support. Russian finance minister Anton Siluanov said Moscow was unable to access $300bn of its $640bn in gold and foreign exchange reserves, but still held
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