Russian default no longer ‘unlikely’, but no trigger for global financial crisis – IMF


WASHINGTON, March 13 (Reuters) – Russia could default on debt following unprecedented sanctions over its invasion of Ukraine, but that would not trigger a global financial crisis, the Managing Director of the Monetary Fund said on Sunday. international, Kristalina Georgieva.

Georgieva told CBS’s “Face the Nation” program that sanctions imposed by the United States and other democracies are already having a “serious” impact on Russia’s economy and will trigger a deep recession there this year.

The war and sanctions would also have significant spillover effects on neighboring countries that depended on Russian energy supplies and had already resulted in a wave of refugees compared to that seen during World War II, she said.

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Russia calls its actions in Ukraine a “special operation”.

The sanctions also limited Russia’s ability to access its resources and repay its debts, meaning a default was no longer considered “unlikely”, Georgieva said.

When asked if such a default could trigger a financial crisis in the world, she replied: “At the moment, no”.

The banks’ total exposure to Russia was about $120 billion, an amount that, while not insignificant, was “not systemically relevant”, she said.

When asked if Russia could access the $1.4 billion IMF emergency funding approved for Ukraine last week if Moscow won the war and installed a new government, Georgieva said the funds were in a special account accessible only by the Ukrainian government.

An IMF official said it referred to the “internationally recognized government of Ukraine”.

Last year, the IMF blocked access to funds from Afghanistan by the Taliban after it took control of the government, citing a lack of clarity over the recognition of the Taliban leadership within the international community.

Georgieva said last week that the IMF would cut back its previous forecast for global economic growth of 4.4% in 2022 as a result of the war, but said the overall trajectory remained positive. Read more

Growth remained robust in countries like the United States that recovered quickly from the COVID-19 pandemic, she told CBS.

The impact would be most severe in terms of rising commodity prices and inflation, which could lead to hunger and food insecurity in parts of Africa, she said.

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Reporting by Andrea Shalal; Editing by Marguerita Choy and Daniel Wallis

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