Russia Makes Debt Payment
Credit by Japan Times

Russia states it has made the late payments on its foreign debt, heading off a possible default next week. There were totally $650m interest payments made in dollars. The chief of Russia’s central bank, Elvira Nabiullina, told the journalist that there were not possibility to the default but they have difficulties with payments. This means that they will be able to pay the debt within the difficulties.

Many had questioned whether Moscow would be able to encounter its obligations as the deadline loomed on 4 may. The country must pay $40bn of international bonds in the currency that was specified originally.

But Russia’s reserve funds could not be accessible anymore because of the sanctions by the west and buddies in the wake of invasion by Russia to Ukraine. Well, though they are able to pay yet they cannot access the reserve funds.

Moscow made a proposal earlier this month to meet its obligations dealing with the particular bonds in the roubles. Moody’s and other credit ratings agencies had refused being advised.

According to the credit ratings agencies, the payment would be to a default. That would create significant implications for Russia’s economy including to make a loan in the future.  A big question is: Will Russia be able to pay the debts it made? Almost half of Ukraine’s economy was cut by the war. In short, war influenced almost all of economy sectors if the countries involved.

In 1998, Russia defaulted on rouble-dominated debt when the country was experiencing a financial crisis. Far beyond, it defaulted on its debt of foreign currency in 1918 to follow the Bolshevik revolution. At that moment, the revolutionary leader, Vladimir Lenin, had refused to note the debt obligations inherited from the tsarist government.

4 May is the due-date when the investors must receive the money it lent to the country. This way, the investors had given a 30-day grace period for the country to pay the debt. This is in response to the Russia’s failure to make payments.

Russia told it had made the payment to the London branch of Citibank which one of the banks obligated for fulfilling the payments. At that moment, A US official told that the payment had been made but they didn’t use the frozen dollars assets from within the US.

The difficulties faced by Russia significantly increase before 25 May when the rules of sanctions are changing to limit if the western agents are allowed to process the payment of Russian debts.  To boost the weakening economy, Russia cut 3% of its interest rates on Friday. Now the main landing rate is at 14%, raised in the immediate invasion result.

Finally, Russia has made the payments through the difficulties along with all consequences such as the reserve funds that are accessible no more, the sanctions rules and the interest rate that is cut up to 3%. This was to avoid the debt default in the next following weeks or in the future.

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