IMF chief says Russian default no longer an ‘improbable event’

Kristalina Georgieva, the managing director of the International Monetary Fund, said on Sunday that a Russian default was not improbably amid global sanctions that have devastated its economy. 

“I can say that no longer we think of Russian default as improbable event,” Georgieva said on CBS’s “Face the Nation” on Sunday. “Russia has the money to service its debt, but cannot access it.”

When asked by CBS’s Margaret Brennan if such a situation could trigger a financial crisis for the rest of the world, the IMF head responded, “For now, no.”

“We expect a deep recession in Russia, and this abrupt contraction is affecting already how the Russian population is taking the heat on them,” Georgieva added.

“The ruble depreciated significantly. What does it mean? Real incomes have shrunk. Purchasing power of the Russian population has significantly diminished.”

But Georgieva added that she was most concerned about the ramifications of the invasion beyond Russia and Ukraine, especially in terms of neighboring nations that are taking in a large number of refugees.

She also cited concerns for “countries that have yet to recover from the COVID-induced economic crisis” and for countries that are “more dependent on energy imports from Russia.”

Since Russia began its unprovoked invasion of Ukraine over two weeks ago, international sanctions have been imposed against Moscow, severing many of its ties to the global economy.

In response, the Kremlin and Russian Central Bank have attempted to prevent the ruble from further devaluation and retaliate Western sanctions by stopping its foreign exports of grain, banning the purchase of dollars and other foreign currencies and limiting the amount of foreign currency Russians take out of their bank accounts.  

Experts say the fallout could last long after the war in Ukraine ends and tarnish Russia’s standing for decades, even if sanctions are eased. 

“Measures like this are going to stay in place for a long time. I think this is going to cut Russia off from access to Western finance, trade and investment for years, if not decades, to come,” Edward Alden, senior fellow at the Council on Foreign Relations, told The Hill.