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Russia currently has 15 international bonds outstanding with a face value of around $40 billion. Prior to the Ukraine crisis, around $20 billion was held by investment funds and fund managers outside of Russia. This week’s drama centered on two bonds issued by the government in 2013, for which coupon, or interest, payments worth just over $117 million combined were due on Wednesday. Initially, Russia seemed reluctant to send scarce hard currency abroad, but on Monday the Finance Ministry said it had approved a temporary procedure for making the payments. Even if Russia remains willing to pay, there may be complications, especially for bonds that must be paid in dollars. Western sanctions prohibit dealings with Russia’s finance ministry, central bank, or national wealth fund, though Temporary General License 9A issued by OFAC on March 2 makes an exception for the purposes of “receiving interest , dividends or debt- or equity-related maturity payments.” Some analysts suggest that money frozen overseas under sanctions may have been used for payments this week, although the Russia has generally paid its debt out of budgetary funds in the past.
  • What will happen if he does not pay?

If Russia fails to make any of its bond payments within the defined grace periods, or pays in rubles when dollars or euros are specified, it will be a historical default. Russia has nearly $650 billion in central bank reserves, one of the lowest debt-to-GDP ratios in the world, and has raked in cash from soaring oil and gas prices . A default would bar it from international debt markets until sanctions are lifted and it reimburses creditors for losses incurred.

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