Bloomberg: Russia's first foreign debt default since 1918 In Russia, the default was called “artificial” and many times they declared their readiness to service the external debt .jpg” alt=”Bloomberg reported that Russia defaulted for the first time since 1918″ />
On the night of June 27, for the first time since 1918, Russia defaulted on sovereign debt in foreign currency, writes Bloomberg.
Default— is the default of the debtor to pay the debt. The announcement of default by the state lowers its credit ratings— it becomes difficult or impossible for the country to attract new loans, as a result, the limited infusion of external capital hinders the development of the economy.
The grace period for about $100 million in late payments on government bonds expired on Sunday, according to the agency, and in the event of default, the deadline is considered a default event. At the same time, Bloomberg points out that “the default is mostly symbolic and means little to Russians.”
RBC turned to the Russian Ministry of Finance for comment.
We are talking about dollar bonds of the Ministry of Finance, the balance of which for $552 million Russia was supposed to pay off on April 4. However, at that time, the United States blocked Russia's ability to pay its debts from frozen reserves, and the Ministry of Finance initiated the fulfillment of the obligation in rubles. Western market participants prepared to default on these bonds, citing an uncoordinated change in the currency of payment, but the Ministry of Finance at the end of April still managed to bring funds in dollars to foreign investors (according to Bloomberg, for this, free from encumbrance dollar accounts of the Mortgage Corporation « ;Dom.RF»).
On May 11, the former holders of these bonds, who had received the principal payment by May 2, filed a notice of Russian default with the Euroclear clearing system, citing the fact that they did not receive additional interest accrued from April 4 to the date of the actual bond redemption. Russia, when paying the principal at the end of April, did not include this additional interest in its payment, they argue. “Following the demand of the holders of securities, Russia never paid this interest,” — creditors indicated.
Read on RBC Pro Pro Second after Microsoft: why Oracle is on top despite the recession Articles Pro The benefits of regrets and the power of sincere fun: 5 fresh books on self-development the fashion for educational startups ends Articles Pro Microsoft or Netflix: who will become the leader in the gaming market. Digest Articles Pro Is it true that you can catch a cold under air conditioning? Articles Pro Hello, Izaura: what awaits online cinemas after the departure of Western majors? p>In April, the US banned Russia from servicing external debt without renewing the license that allowed holders of Russian sovereign bonds to receive payments. This license expired on May 25th. London Citibank then refused to act as a payment agency for Russian dollar issues, and the Ministry of Finance transferred these functions to the National Settlement Depository (NSD). In early June, NSD also came under EU sanctions.
In the Kremlin, after the sanctions against the national depository, they announced attempts by Brussels to push Russia into an “artificial default”. Siluanov called the creation of artificial barriers to service Russia's public debt a farce. “You can declare anything and try to hang a label. But everyone who understands understands that this is not a default, — the minister emphasized. In his opinion, it would be appropriate to call a default in this situation the refusal of foreign financial intermediaries to fulfill their obligations, since this “damages the business reputation of Western financial institutions.”
On June 22, President Vladimir Putin signed a decree on the payment currency debt in rubles. To do this, all foreign investors were opened ruble accounts of the “I” type without their personal presence. The next day, the Ministry of Finance paid off its Eurobonds in rubles for the first time under the new scheme.
At the end of 2021, Russia's public debt amounted to ₽20.9 trillion— 18.1% of the country's GDP, according to the Accounts Chamber. Domestic debt amounted to ₽16.5 trillion. External debt in foreign currency reached $59.7 billion
According to the Bank of Russia, as of January 1, 2022, the external debt of the Russian Federation amounted to $478.2 billion. the amount takes into account not only the debts of the public sector, but also private companies that borrow funds in foreign markets.