The news of the next round of talks between the two Russian and Ukrainian delegations allows the markets to breathe with equities seeking to consolidate last week’s recovery and commodity prices in sharp decline. The economic situation in Russia has also been discussed, which, just a few days before the expiry of a key interest payment on its foreign debt, has threatened to pay international bondholders in rubles rather than dollars.
Anton Siluanov, Russia’s finance minister, said on Sunday that it was “absolutely right” for the country to make all sovereign debt payments in rubles until Western sanctions, which have frozen some $ 300 billion of the country’s reserves, do not. will be revoked. The latest warning to foreign bondholders increases the chances of the country defaulting for the first time since the 1998 Russian financial crisis, as its financial system is strained by the measures western governments have taken following the invasion .
“We have to pay for critical imports. Food, medicine, a whole host of other vital goods,” Siluanov told a state television reporter. “But the debts we have to pay to countries that have been hostile to the Russian Federation we will pay them in the equivalent in rubles,” added the finance minister, who stressed that almost half of the Russian 643 billion dollar foreign reserves are been subject to sanctions, but did not disclose the denominations and jurisdictions in which Russia holds other currencies.
After the deadline, Moscow will have a grace period of 30 days to make payments, otherwise it can be declared insolvent. Regarding the possible default of Russia, Kristalina Georgieva, operational director of the International Monetary Fund, explained that the country could default due to its debts in the wake of unprecedented sanctions after the invasion, but that would not trigger a financial crisis. global. Georgieva stressed that the banks’ total exposure to Russia amounts to approximately $ 120 billion, an amount that, while not insignificant, “is not systematically relevant”.
In addition to paying the foreign debt in rubles, Russia’s central bank intends to adopt a new way to calculate the official exchange rate of the ruble against the dollar after Western sanctions rocked Moscow’s currency prices. The Bank of Russia said it will calculate the exchange rate of the ruble against a wider range of quotes to reduce its volatility. The bank will set the official exchange rate against the dollar using foreign exchange transactions from 10:00 to 16:30 Moscow time, compared to the 10: 00-11: 30 window used so far.
The central bank did not specify exactly when the new mechanism will come into effect. Currency traders and investors have noticed a growing gap between the value of the ruble / dollar exchange on the Moscow Exchange and its trading on international markets. This stems in part from the capital controls that the Russian central bank has put in place to stem the fall of the currency and also from the reluctance of foreign banks to exchange Russian currency following Western sanctions. Currently the dollar is falling against the ruble and loses 3.27% to 110.51, the Russian currency on international markets is also gaining ground on the single currency which is now worth 119.89 rubles (-0.93%). (All rights reserved)
