Doubts Will Not Be Capable to Pay Its Debts

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Doubts  Will Not Be Capable to Pay Its Debts

Doubts  Will Not Be Capable to Pay Its Debts

may pay off its debts after Western sanctions were imposed after it invaded e. Today, it will pay investors $117 million in interest on two-dollar-denominated bonds. Credit rating agencies warned that debt default is inevitable. The n finance minister said the claim has been paid and is awaiting an installment in the US banking system. It is unclear whether the current deadline for interest payments is met.

The n government and firms such as Lukoil, Gazprom, and Sberbank owe about $150 billion to foreign investors. Most of this is in dollars or euros. Accordingly, interest and payment must be in that currency. However, sanctions imposed after the invasion of e mean that  lost access to much of its $630 billion in foreign exchange reserves. However, it still receives dollars for the oil, gas, and other items it sells abroad, and foreign currency is available. If  completes the default, it will be its first debt since 1998.

In addition, it will also be the country’s first default in foreign currency since the 1917 revolution, When the new Bolshevik government refused to recognize the debts of the last tsar. However, if  pays using the existing dollar in the country, then the default concern will now disappear.

Another possibility is that  will not pay today; While $117 million has been paid; technically, there is a 30-day grace period to settle the tax by April 15th. So  will not be officially considered a default until then. The third option is where  pays rubles. His foreign ministry said it would pay international investors in rubles if they did not pay in dollars or euros.

and The Global Economy

However, none of the dollar-denominated bonds you have to pay today allow you to use any other currency, so it is likely to cause a default. Some other n debt agreements will enable the use of different currencies; In this case, payment in rubles may be acceptable. This will depend on whether the ruble payment is the same value as the actual dollar or euro payment that investors expected.

Investors in  have seen the value of their investments decline in recent days. The problem will be falling rapidly from ’s financial grace for many. According to Moody, from a 21-point rating scale that indicates how credible the country is as a place to invest, ’s rating is now the second-lowest and may fall even further. According to Moody, this rating also means that it is waiting for a n default. Accordingly, he warns investors in  that they could lose up to 35% -65% of their money.

Finally, when  defaulted – in 1998 – it shocked the financial markets. According to the chief economist at Capital Economics, now the default will be very symbolic; However, significant results are likely to follow. The International Monetary Fund has said it will cut its forecast for global economic growth by 4.4% in 2022 due to the war. However, the head of the International Monetary Fund rejected the idea of ​​a broader shock to the global financial system due to ’s default.

Conclusion

However, he warned that sanctions against  would lead to a deep recession. Consequently, the war will increase global food and energy prices. A still unknown factor is what could be the non-payment of debt by n firms and what impact they may have on foreign investors who have made significant investments in .

Any debt default is likely to exacerbate financial and economic problems, Which  is now facing. Before invading e,  was one of the most creditworthy countries with low debt levels. However, now everything has changed dramatically.

Many foreign firms have left, and Moscow imposed strict credit controls to restrict the outflow of money to protect the economy and the ruble. Nevertheless, the n economy will shrink by 7% this year due to sanctions. Inflation was already 9.15% in February before the invasion of e. It is now suggested that it increase considerably, Although the Central Bank of  will raise interest rates to 20%, from 9.5%.

 

 

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