Russia has sufficient funds to service its external debt.

This was announced on Thursday, April 21, by Chairman of the Central Bank of the Russian Federation Elvira Nabiullina during a speech in the State Duma.

“Russia has all the necessary financial resources.

No default threatens us, ”Nabiullina assured.

Recall that at the end of February 2022, the United States, the European Union and a number of other states froze almost half of Russia's gold and foreign exchange reserves (GFRs).

We are talking about that part of the country's cash reserves, which was placed in dollars, euros and some other currencies on the accounts of foreign banks and organizations.

“After the sanctions imposed on the Central Bank by Western countries, we now have the opportunity to dispose of about half of the reserves, but this is gold, yuan,” the head of the Central Bank explained earlier.

According to the Russian Ministry of Finance, funds totaling about $300 billion were blocked. Against this background, major rating agencies, the International Monetary Fund, as well as a number of Western politicians warned about the risk of a default in Russia.

Default means the borrower's refusal to fulfill its monetary obligations.

Russia faced such a situation in 1998.

Then, against the background of a number of economic problems and the complete depletion of the reserves of the Central Bank, the country suspended the fulfillment of its debt obligations for 90 days.

According to the latest data from the Central Bank, the volume of Russia's gold and foreign exchange reserves exceeds $609 billion. The total amount of cash reserves makes it possible to fully cover the country's external debt (about $454 billion as of April 1, 2022).

At the same time, partial blocking of gold reserves creates technical difficulties for debt repayment.

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Note that Russia borrows money from other countries through government bonds.

We are talking about the so-called Eurobonds, which are denominated in foreign currency and represent debt obligations guaranteed by the government.

Investors buy securities issued by the Ministry of Finance and receive a stable income from them.

Thus, holders of government bonds lend their money to the Russian economy.

“This method of borrowing is traditionally considered a source of cheap and so-called long-term money.

Failure to pay such obligations threatens to cut us off from foreign currency borrowings on the Eurobond market for a long time.

Neither business nor the Russian authorities want this, so the Central Bank and the Ministry of Finance will look to the last for alternative ways to pay debts, ”said Alexander Abramov, head of the laboratory at the Institute of Applied Economic Research of the RANEPA, to RT.

It is noteworthy that in mid-March the United States decided to unfreeze part of the Russian reserves in order to receive payments on the debt.

However, later the States canceled this relief as well.

As a result, on April 4, the Ministry of Finance of the Russian Federation was unable to pay in dollars for Eurobonds "Russia-2022" and "Russia-2042".

According to the ministry, a foreign correspondent bank refused to fulfill a payment order in the amount of $649.2 million. In this regard, the Ministry of Finance decided for the first time to make a payment on external debt in rubles at the official exchange rate of the Central Bank.

At the same time, according to the international rating agency Moody's, such a settlement procedure is not provided for by the current agreements.

“Although Eurobonds issued after 2018, under certain conditions, allow payments in rubles, bonds issued before 2018 (including Eurobonds Russia-2022 and Russia-2042) either do not contain such a condition on changing foreign currency payments, or allow payments only in other hard currencies (dollar, euro, pound sterling or Swiss franc),” the agency said in a statement.

The organization's experts stressed that Russia has 30 days to fulfill its obligations in foreign currency.

Otherwise, already on May 4, the situation can be called a default.

Workaround

According to experts, in the current circumstances, Russia does not refuse to pay off its external debt and continues to conscientiously strive to fulfill its obligations.

At the same time, the West, by its actions, is trying to organize an artificial default in the country, analysts say.

“There is no question of a classic default, when the borrower does not have enough funds to repay and payments are not made.

This is what Elvira Nabiullina had in mind when she said that no default threatens Russia.

However, formally not bringing money to creditors can be the basis for recognizing a technical default, no matter how paradoxical it may sound now, ”said Mark Goykhman, chief analyst at TeleTrade Group, in an interview with RT.

A similar point of view was expressed by a member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers Alexander Razuvaev.

As the specialist emphasized, the possible announcement of a default in Russia is a purely political issue that does not reflect the real state of affairs in the economy.

“There will be no fatal consequences for us in this case.

At most, the West can seize the real estate of Russian companies abroad, but this is already being done.

That is, we are talking about pure fraud - Russia has money, but we are not allowed to pay, ”the source added to RT.

However, according to Alexander Abramov, Elvira Nabiullina's statements may indicate that in an extreme case, the state will find funds even to fulfill its obligations in dollars.

Today, Russia receives a fairly high volume of foreign exchange earnings from the sale of raw materials against the background of the increased cost of energy resources in the world.

Thus, if necessary, Moscow can send this money to pay off external debt, the economist does not exclude.

“Now foreign exchange earnings from export sales provide for the primary needs of the state - they maintain the stability of the economy and the national currency rate, and also go to purchase imports.

Perhaps, as tensions ease and free funds become available, we will switch to paying debt in foreign currency.

Until that time, we will try to pay in rubles under those agreements that provide for such an opportunity, ”concluded Abramov.