Russian Default on Debts No Longer ‘Improbable’: IMF Head

The International Monetary Fund (IMF) sees that a Russian default on its debts has become more than likely, but would not trigger a global financial crisis, the international lender’s head said on Sunday.

Impacts of the sanctions imposed by the United States and its allies have been “severe” for Russia’s economy and would trigger a deep recession there this year, managing director of the IMF Kristalina Georgieva said.

“In terms of servicing debt obligations, I can say that no longer we think of Russian default as improbable event. Russia has the money to service its debt, but cannot access it,” Georgieva told CBS’s Face the Nation.

Last week, Fitch slashed the rating of Russia’s sovereign debts to junk, saying that default is “imminent”. The World Bank had also previously warned that Russia and its ally Belarus were “mightily close” to default.

The IMF head added that the economic impacts of the war could go beyond Russia and Ukraine, and their immediate neighbors. Other areas that will be most affected would be the countries that are struggling to recover from the COVID-19 pandemic, and those that depend on Russia for energy imports, according to Georgieva.

Asked whether a Russian default would cause a global financial crisis, Georgieva answered, “For now, no.” The total exposure of banks to Russia is about $120 billion, which was not negligent but also “not systematically relevant”, she said.

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