The G7 nations, UK, USA, Canada, Japan, Germany, France, and Italy (plus the EU), met on Friday and pledged to cut off Moscow’s access to lenders like the International Monetary Fund and the World Bank.
Without help from the IMF, the G7 nations are hoping, Putin will struggle to push forward in his war against Ukraine. In a statement the group announced: “Russia cannot grossly violate international law and expect to benefit from being part of the international economic order” (Business Insider, 2022).
The attack on Ukraine has cost Russia more money and time as anticipated by the Kremlin leaders. Additionally, after little to no resistance from the world community during the take-over of the Crimea, Russia may not have expected the restrictions it is now facing.
Moscow’s foreign currency and gold reserves have been frozen, throwing the country into a debt crisis. During a previous currency and debt crisis in 1998, Russia relied on emergency funding, receiving a $22.5 billion bailout from the IMF and other lenders as it defaulted on sovereign debt.
On Wednesday Russia is due a debt payment of $117 million on two dollar-denominated bonds. However, the country’s finance ministry wants to make its sovereign bond payments dependent on Western sanctions and announced should it pay, it would pay in its own currency, ruble.
A debt default seems almost certain as Fitch downgraded Russia’s credit rating and stated that a sovereign default is “imminent” (Business Insider, 2022). With Moody and S&P Global also cutting Russia’s rating, all three top rating agencies have stamped the country’s credit subpar.
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*Rosen, Phil (14. March 2022). Business Insider: Russia may be cut off from the world’s lender of last resort as bonds head toward default. Last viewed on 15.03.2022 on https://markets.businessinsider.com/news/bonds/russia-bond-default-imf-world-bank-bailout-ukraine-g7-sanctions-2022-3.
*G7 UK 2021. G7UK 2021: What is the G7?. Last viewed on 15.03.2022 on https://www.g7uk.org/what-is-the-g7/.
